Calls were made ahead of the Budget for her to reduce the early withdrawal charge on the Lifetime Isa (Lisa) from 25% to 20%. Some commentators have also argued that the Lisa limit should be raised to £600,000.

The 25% early withdrawal charge currently imposed effectively acts as a 6.25% exit penalty.

AJ Bell director of public policy Tom Selby slammed the charge as “deeply unfair”.

He said it “punishes” those for whom a change of circumstances means they cannot pursue their homeownership aspirations.

Rajan Lakhani, a spokesperson for money app Plum, said he was “disappointed” that Lisas were not addressed.

“Penalties are hitting more and more first-time buyers as house prices continue to soar.

“Our recent research showed that HMRC has charged some people more than £11,000 to withdraw their Lisa – a huge amount of money for any first-time buyer.

“Most local authorities in London and 28 local authorities outside London have an average house price of above £450,000.

“This leaves first-time buyers stuck when they finally save enough to buy their first home.”

Lakhani said it is “high time” that the situation is made fairer for first-time buyers.

“We’ve been campaigning for the Lisa limit to be raised to £600,000,” he added.

“It’s important to remember that an increase to this amount would only bring the limit more or less in line with house price inflation since the Lisa was launched in 2017.”

He argued that this was a “missed opportunity” for the government to “take a stand” for the country’s young people by raising the limit.

The government first launched the Lisa in April 2017, to help young people to save for their first home.

Those wishing to open an account must be 18 or over but under 40.

Up to £4,000 can be put into a Lisa each year until the age of 50. The first payment into a Lisa must be made before the age of 40.

The government adds a 25% bonus to contributions, up to a maximum of £1,000 per year.

The post Lifetime Isa left out of 2024 Autumn Budget appeared first on Money Marketing.

It has partnered with Investec Bank to offer a 12-month fixed rate deposit within its Cash Isa and Cash Lifetime Isa options, with plans to expand cash investment choices in the future.

This follows the July launch of the Fundment stocks and shares Lifetime Isa (Lisa) and addresses growing adviser and client demand for cash options.

Fundment founder and chief executive Ola Abdul said: “We’re expanding our Isa range in line with adviser demand.

“This move, coupled with the full digitisation of our underlying cash investment functionality, demonstrates our commitment to providing advisers with the tools they need to serve their clients effectively.”

The platform has also fully digitised its cash investment process, streamlining operations for advisers.

From digital account opening and client approval to automated payments of fees, income, and dividends, the process is intuitive and designed to save time, allowing advisers to focus on delivering value to their clients.

Investec head of funding partnerships David Hunt said: “Our collaboration with Fundment aligns perfectly with our commitment to tech-driven, digitally-enabled financial solutions.

“By leveraging our API, Fundment has created a frictionless experience for advisers and their clients.”

Beyond the 12-month FRD in Cash Isas and Cash Lisas, Fundment offers fixed term deposits within pension and general investment wrappers.

These Investec Bank products are available in three-, six-, 12-, and 24-month terms.

The post Fundment further expands wrapper range with cash Isa and cash Lifetime Isa appeared first on Money Marketing.

The Fundment Lisa will provide a tax-efficient way for clients to save for a first house or retirement.

It further bolsters the adviser-led platform’s range of wrappers and accounts.

This currently includes a personal pension, junior pension, stocks and shares Isa, junior Isa and general investment account.

Investors may transfer cash or investments from another Isa (or a matured child trust fund) into the Fundment Lisa.

In-specie transfers are available from a stocks and shares Isa or another Lisa.

Providing a Lisa product can help pave the way for an intergenerational planning conversation, where suitable.

Fundment chief executive Ola Abdul said: “Advisers have been asking us for a Lisa, so we are delighted to meet that demand today – we have a proud history of anticipating and responding to adviser needs.

“Advisers’ experience when opening a Lisa should be as smooth as possible and, as a digital platform, we enjoy the challenge.

“We have removed points of friction when opening or transferring into accounts and when onboarding clients – simplifying things for advisers.”

MM Meets Ola Abdul, Fundment CEO

Matt Greer, a chartered financial planner with Navigate IFA, said several of his clients had been pushing for access to a Lisa.

“Clients in a Lisa earn £1 for every £4 they put in – a tremendous reward for those saving towards their first home or retirement.

“For us as advisers, there aren’t many platforms that offer a Lisa, so we’re delighted with Fundment. I’m looking forward to giving my clients the good news.”

Sharon Bray, practice manager at Jacksons Wealth Management, added: “We are always looking for more options from our platform providers.

“Since day one, Fundment has asked for feedback and listened to what we have to say. Fundment hears us and works with us to evolve a better experience for us and our clients.”

In May last year, Fundment launched custom indexing, to allow investors to directly hold the individual stocks within an index and to personalise their holdings to match their preferences.

Custom indexing offers retail investors the control, flexibility and lower costs more typically afforded to institutional investors via segregated mandates.

According to Fundment, it broadens advisers’ ability to offer investment solutions more closely aligned with the needs and preferences of clients.

The previous year, the business teamed up with CashCalc in a bid to improve integration between the two firms’ adviser technology.

The post Exclusive: Fundment bolsters wrapper range with Lisa launch appeared first on Money Marketing.

Despite the uncertainty, planning is still needed, and it is critical that advisers approach TTFACs on a case-by-case basis. This is because proceeding down the TTFAC route is an irreversible procedure and won’t always put a client in a better position. In some cases, it might leave them worse off and could even amount to a violation of the Consumer Duty.

We explore what TTFACs are and who might benefit – as well as the circumstances in which they may not provide a benefit at all.

What’s changed?

With the abolition of the LTA, two new allowances have taken its place. These are the lump sum allowance (LSA), which has a default allowance of £268,275, and the lump sum and death benefit allowance (LSDBA), which has a default allowance of £1,073,100.

The initial level of the new allowances will be adjusted where an individual has used up some – or all – of their LTA prior to 6 April 2024. The default calculation will look at the amount of LTA used, and 25% of that will be deducted from both the LSA and LSDBA.

Introducing the TTFAC

The issue with this default is that it assumes 25% was taken as a tax-free lump sum every time benefits were crystallised prior to 6 April, which may not have been the case.

To address this, HMRC is allowing individuals to apply for a transitional tax-free amount certificate (TTFAC), potentially allowing 25% tax-free cash to be taken with future withdrawals where otherwise there would be no tax-free cash.

Despite the uncertainty, planning is still needed, and it is critical that advisers approach TTFACs on a case-by-case basis

Where someone can evidence that the tax-free lump sums they’ve taken before 6 April 2024 come to less than 25% of their amount of LTA used, they can present that to their pension scheme and ask them to produce a TTFAC. This certificate will confirm the individual’s available LSA and LSDBA for use in the future.

A TTFAC must be in place before the first relevant benefit crystallisation event (RBCE) occurs after 5 April 2024. An RBCE only happens when specific tax-free lump sums are taken and not where pensions are put into payment for income only. If an RBCE occurs before a TTFAC is granted, then the certification method cannot be used and the standard calculation will always apply.

Who will and won’t benefit?

Once a TTFAC is issued, it will always apply and cannot be revoked by the individual. And it won’t be right for every client, which is why assessing individual needs is so important.

For example, if an individual has always taken 25% as tax-free cash when they’ve vested a pension, and they didn’t crystallise anything when the LTA was lower than £1,073,100, then a TTFAC won’t give them a better allowance.

In fact, if they’d taken lump sums when the LTA was greater than £1,073,100, then it could put them in a worse position as the actual amounts of cash taken are larger than the equivalent percentage of £1,073,100. The standard calculation of 25% of the LTA used would be better in this circumstance.

It may benefit some, however. To help determine this, advisers will need to scrutinise each individual’s complete history. Typical situations that could be worth looking into more closely include where:

• benefits were vested without taking any lump sums;
• benefits vested during 2016/17 to 2019/20 when the LTA was lower than £1,073,100;
• funds were transferred to a qualifying recognised overseas pension scheme (QROPS) – LTA would have been used up, but no tax-free lump sums would have been paid at the time;
• a client reached age 75 before 6 April 2024 and LTA was used by the age 75 tests (i.e. no tax-free cash was taken).

Ultimately, the investigation is just a comparison between 25% of the amount of LTA the individual has used, versus the total of all their tax-free lump sums they’ve taken.

Once a TTFAC is issued, it will always apply and cannot be revoked by the individual. And it won’t be right for every client

Also bear in mind that it might be the case that while you can’t improve a clients’ LSA situation with a TTFAC, you may still be able to increase available LSDBA.

For example, if 100% of the LTA had been used as of 5 April 2024, the default position is that both the LSA and LSDBA are zero. A TTFAC might not give any additional LSA if the actual amounts of tax-free lump sums already taken are £268,275 or higher, but it could help the LSDBA.

So, if they’d only taken a pension commencement lump sum (PCLS) of £268,275, on successful application for a TTFAC, this amount is deducted from the LSDBA of £1,073,100 (assuming no protection). This would give them an available LSDBA of £804,825, and not zero as would have been the case using the standard calculation.

Looking ahead

The TTFAC is an important method for preserving or increasing the amount of tax-free benefits available from a pension. But obtaining one will not be the best course of action for everyone, and certainly shouldn’t be applied for on a ‘just in case needed’ basis. It is also worth noting that the TTFAC can be applied for after a member’s death by their personal representatives if required.

To help advisers with identifying which clients should consider applying, we’ve developed a free decision-tree, which can be accessed here.

Those who are actively taking benefits and who think a TTFAC will help are those that need to consider this without delay, as they need to apply before any new tax-free lump sums are taken.

Dave Downie is technical manager at abrdn

The post Applying for LTA transitional tax-free certificates shouldn’t be a blanket decision appeared first on Money Marketing.

In its latest annual report, the wealth management group said the total client assets of the group and its associate rose 23.1% to £14.9bn (2021: £12.1bn) at year end.

Meanwhile, revenue increased 72.8% to £108.2m (2021: £62.6m) and strong organic revenue growth was up 10.0% to £62.2m (2021: £56.6m).

The business won 1,084 new clients (2021: 898), which it said represents investment in business development initiatives.

Mattoli Woods’ strategic goals are to grow group’s operations towards £300m of revenues, £30bn of total client assets and £100m of EBITDA.

Chief executive Ian Mattioli said he wanted the company to maintain its “positive momentum”.

He also said he wanted it to advance its strategic initiatives of new business generation and growth through the integration of acquisitions.

Finally, Mattioli wants the firm to develop new products and services, review its processes and invest in technology to improve the client’s experience and ensure further operational efficiencies.

“Investment markets are likely to remain volatile for some time, although the spectre of rising inflation typically creates significant advice opportunities given our diverse revenue streams and for further investment inflows as existing and prospective clients consider appropriately investing surplus cash to avoid suffering an erosion in value of savings in real terms.

“We will continue to seek to understand our clients’ needs and provide quality solutions, maintaining our focus on client service and continuing to adapt our business model to the changing market, integrating asset management and financial planning.”

He added that Mattioli Woods wants to build on its “track record of successful acquisitions”, by continuing to assess and progress opportunities that meet its “strict criteria”.

“Consolidation within wealth management, asset management and SIPP administration is expected to continue for the foreseeable future, with many more opportunities coming to market,” said Mattioli.

“The outlook for the new financial year remains positive, notwithstanding the continuing challenging macroeconomic conditions, and we continue to trade in line with expectations.

“As previously disclosed, cost inflation and progressing our strategic initiatives including investment in people and technology are expected to impact margins in the short term but will position us to secure future growth in revenue and profits.

“This will also provide opportunities to deliver future growth and sustainable shareholder returns as a business that is here for the long term”.

The post Mattioli Woods made £46m from acquisitions last year appeared first on Money Marketing.

ConsumerDuty will make ongoing fees hard to justify

The upcoming Consumer Duty is likely to make ongoing advice fees hard to justify in the short to medium-term future.This is the view of PIMFA head of public affairs Simon Harrington, who spoke at the Money Marketing’s Retirement Summit on 10 June. “It will force firms to look inwardly in the way that they have never done before, because the advice market is quite uncompetitive,” he said.

A decade of the SJP Academy: changing the face of advice

Features writer Amanda Newman Smith spoke to Andy Payne who is head of St James’s Place Academy. The reason? It opened its doors 10 years ago. Her discussion with Payne touched on the academy’s influence and where he hopes it will go in the future. Since inception, the academy has helped to start 658 new advice businesses. These operate as partner practices of SJP, which have contributed to the firm’s growth.

Top to bottom: Is vertical integration good for advisers?

Chief reporter Lois Vallely’s cover for the June issue on Aviva’s purchase of Succession did very well. Aviva caused quite a stir when it purchased consolidator Succession Wealth for £385m in March this year. Deals in the adviser market have become almost routine and it would be unsurprising if we write another cover on the theme of consolidation in the future.

CII potentially ‘bankrupt’ from botched IT spending

Jean-Baptiste Andrieux has been hard at work covering the inner workings of the Chartered Insurance Institute (CII). His most popular story was about the body being potentially bankrupt from misguided IT spending. The IT budget was initially agreed at £4.4m according to internal sources but is alleged to have gone four times over. A spokesperson at the CII said that the IT transformation programme started in 2018.

Bailey: ‘Please don’t think FCA sat on British Steel info’

The past can come back to haunt you if you are a top-flight regulator. Andrew Bailey pleaded with MPs to realise the regulator was active during the British Steel Pension Scheme (BSPS) saga. The Public Accounts Committee questioned the Bank of England governor in his capacity as former head of the Financial Conduct Authority on 13 June. Bailey was giving evidence on the British Steel scandal.

Malcolm Kerr: Fair value may be £60 asparagus, not 2% a year

How do you connect asparagus and advice fees? Malcolm Kerr came up with one in his column on charges. It was a thought provoking read and inspired much comment. His main argument is that financial advisers have something in common with posh restaurants in that demand exceeds supply. That gives the market its unique characteristics that spills over into fees.

FCA rules out new consumer pensions regulations

It may surprise readers but the Financial Conduct Authority does not always introduce regulations. It has ruled out unveiling new rules to drive improvements in the pensions consumer journey. In a feedback statement with the Pensions Regulator (TPR), the FCA said more can be done to support consumers within the current regulatory framework. It was published in response to a call for input (CFI) on what can be done to help engage consumers.

FOS hires new chief executive to replace Delfas

Things continue to change at the Financial Ombudsman Service. It has appointed Abby Thomas as the chief executive and chief ombudsman. Thomas, 43, will take up her new role in the Autumn. She will replace Nausicaa Delfas, who has been acting as chief executive and chief ombudsman on an interim basis since May 2021. There is much work to do.

Standalone platforms won’t exist in future, Seccl head says

Out with the old, in with the new as far platforms go according to Seccl chief executive David Ferguson. He said standalone platforms will not exist in the future due to changes in technology and a shift in the distribution chain. There will also be a reduction in cost for clients over the next four years from 180 bps to 120 bps by 2026.

Advisers must challenge thinking on multi-asset portfolios 

Advisers must do more to challenge the current thinking on multi-asset portfolios during the accumulation savings period. The call was made by Eadon and Co. retirement director Billy Burrows at the Money Marketing Retirement Summit. Burrows, an expert on pensions and annuities, told the audience the multi-asset portfolio route can be a trap for many advisers with harmful consequences during market crashes.

The post Money Marketing’s most-read stories – June 2022 appeared first on Money Marketing.

Good morning and welcome to your Morning Briefing for Monday 29 November, 2021. To get this in your inbox every morning click here.

Data connection 

US wealth manager Raymond James has become the first firm to partner with a new data integration hub.

The hub called FINIO aims to simplify the integration process between investment platforms and adviser software providers.

It is designed by Sprint Enterprise Technology that was founded in 2010 and is known for Fastrak software.

This enables advisers and wealth managers to review and report on client investments.

AJ Bell makes investing a Dodl

AJ Bell has announced it will launch a new, app-only investment platform which aims to make investing more straightforward and accessible for retail investors.

The new service will be called Dodl by AJ Bell.

It will compete with the lowest-cost investment platforms in the market, with an annual charge of 0.15% and no commission for buying or selling investments.

Time for change

With crucial issues such as climate change and a growing advice gap, what has to be done now to rectify problems before they worsen?

Kim North, managing director at Technology & Technical, write for Money Marketing.

Quote Of The Day

Fear has gripped the financial markets with the travel industry flying into another violent storm.

– Hargreaves Lansdown senior investment and markets analyst Susannah Streeter after the stock markets across the world fell sharply after the discovery of a new Covid variant in states in Southern Africa

In Other News

Brown Shipley has appointed Georgina Breeze as a client advisor for Manchester.

She will report to Martin Cuthbert – head of Brown Shipley’s Manchester office.

Breeze brings 13 years of experience, joining from Barclays Wealth and Investment Management, where she spent the past 10 years looking after high-net-worth and entrepreneur clients, providing investment advice on discretionary and advisory portfolios.

Prior to her time at Barclays Wealth Breeze started her career in financial services at St James’s Place, where she joined as a business development manager. She was later appointed as a financial adviser, responsible for attracting new clients and looking after their investment and financial planning needs.

She also holds a voluntary position as a school governor.

A Gambian ambassador has been ordered to pay more than £80,000 after being found guilty of withholding information from The Pensions Regulator (TPR).

Vincent Bootes was tried in his absence at Brighton Magistrates’ Court on Friday (26 November) in a prosecution brought by TPR over allegations he failed to comply with two notices issued under section 72 of the Pensions Act 2004.

The 58-year-old, who had previously entered a not guilty plea, claimed he could not attend court as he was considered persona non grata in the UK.

Bootes had also renounced his British citizenship to take a position as an ambassador for The Republic of Gambia in West Africa.

The two notices had been issued as part of a TPR investigation into whistleblowers’ allegations that staff working for him at PGT Ceewrite Engineering, had not had automatic enrolment workplace pension contributions paid by his companies, despite the cash being deducted from their pay-packets.

New research from life insurance experts I’m Insured has revealed that more than one in three ‘fin-fluencers’ are providing bad life insurance advice to their large followings.

The business took to TikTok to analyse 70 videos and hours of financial content to measure the accuracy of the claims and the findings showed that over a third of videos contained ill-informed advice.

I’m Insured experts uncovered that the majority of life insurance content on TikTok was for American policies. A problem for UK users looking for insurance-related content, as there is a big difference in our insurance systems.

The research reviewed both the accuracy of the advice provided and how it corresponds with the UK’s insurance regulations and policies, to reveal the dangers faced to TikTok users consuming the life insurance advice provided from fin-fluencers.

Oil and gas and mining companies have raised £1.1bn in new equity in the past year – up 307% from the £270m raised the previous year, according to research from UHY Hacker Young.

The fourfold increase comes as commodity prices boom. Oil and gas prices have hit multi-year highs, while metal prices have also rebounded strongly from their Covid lows.

The unexpectedly strong economic recovery post-pandemic has fuelled demand for commodities.

With the bounce back in prices, oil and gas and mining companies have been looking to raise money as they rush to bring previously mothballed projects back online.

Some have required an injection of new capital from investors to do this.

Did You See?

I’ve been having a mare with one pension provider (which I won’t name), which is pretty much blocking a transfer. Am I alone in not having physical copies of utility bills to send as ID and proof of address? Surely there are quicker and easier ways to verify my identity than sending docs via post?

I even had to take a scanned copy of my driver’s licence to the Post Office to pay to get a verification stamp. What is this, the 90s?

Read my Weekend Essay here.

The post The Morning Briefing: Data connection and AJ Bell’s new investing app appeared first on Money Marketing.

The new service will be called Dodl by AJ Bell, and the firm will aim to launch it in the first half of 2022.

It will compete with the lowest-cost investment platforms in the market, with an annual charge of 0.15% and no commission for buying or selling investments.

Dodl will offer an individual savings account (Isa), lifetime Isa, pension, and general investment account.

Customers will be able to set up regular investments and consolidate existing ISAs and pensions onto the platform.

People will be able to pay money in to accounts via Apple and Google pay, as well as debit card payments and direct debits.

Dodl will give investors access to a simplified investment range with options to cater for the vast majority of investment risk appetites.

Dodl will feature a range of popular shares in UK listed companies, with US companies being added soon after launch.

There will also be a range of themed investments which include funds focusing on core areas such as technology, robotics, healthcare and responsible investing.

The fund range will also consist of the AJ Bell’s multi-asset funds – which cater for six different risk levels. And it will feature AJ Bell’s Responsible Growth fund – for people who want to invest with a responsible focus.

The new mobile app will sit alongside AJ Bell’s existing consumer platform AJ Bell Youinvest.

Costs

There will be a single, all-in annual charge of 0.15% of portfolio value for each investment account a Dodl customer has, with a £1 per month minimum per account.

There will be no commissions for buying or selling investments and no tax wrapper charges.

As an example, for £10,000 invested in an Isa, the Dodl charge would be £15 a year.

Customers investing in funds will also pay the annual charge of the underlying fund as normal.

AJ Bell chief executive Andy Bell said: “Investing doesn’t need to be scary. Dodl by AJ Bell is for anyone looking for a low-cost, easy-to-use investment app to help them meet their investment goals such as saving for a house deposit, holidays or retirement.

“The intuitive investment journey and streamlined investment range will appeal particularly to those that are new to investing and want a simple way to manage their investments.

“With a low annual charge of 0.15%, no trading commissions and all the main tax efficient products, Dodl will be amongst the cheapest and best value investment platforms in the market.

“Our friendly monsters will guide people through the investment process with no jargon and introduce them to an investment range that is easy to choose from and caters for the investment needs of the majority of people.”

Commenting on the launch, Boring Money chief executive Holly Mackay said: “Despite its positioning as an app for newer investors, I should think the majority of people Googling this today will be curious, affluent 40- and 50-somethings, with a relatively mainstream buy and hold portfolio.

“50 shares and 25 external funds will satisfy many people’s requirements – for 0.3% less than Hargreaves Lansdown each year.

“Subject to availability, it will also enable someone to hold a mainstream passive multi-asset fund such as Vanguard’s LifeStrategy, for a total cost of 0.37% a year.

“That’s half the price of your average robo, which arguably does a similar thing. It sounds like a really positive development to me.”

The post Dodl: AJ Bell launches new investment app for retail investors appeared first on Money Marketing.

One approach is to encourage greater investment, including by getting individuals to invest some of their reported billions of excess cash languishing in next to zero cash savings.

As we approach the Autumn Budget, we hope Rishi Sunak recognises the benefits of encouraging greater investment and resists cutting back on the likes of pension contribution allowances. Instead, why not encourage more investment and surprise us with a “rabbit out the hat” doubling of the ISA allowance?

This could take the form of a separate “Build back better” stocks and shares ISA with its own £20,000 limit. This would provide an extra incentive for individuals to make the most of cash savings by investing it, with the potential to achieve real growth in an environment of rising inflation. By doing so, they can contribute personally to economic recovery.

While introducing this new form of ISA would take time, compared to some Budget speculation changes, it’s more achievable in the shorter  term. And for those who need support, the Financial Conduct Authority will be consulting next year on a guided sales process around moving from cash to stocks and shares ISAs.

But would this be sufficiently targeted towards supporting UK economic growth? Might the chancellor want to target UK investments? In a world of global corporations, defining what qualifies as “UK” would be challenging.

On the eve of COP26, with an ever-greater focus on ESG, supporting climate change and achieving net zero targets, could the “Build back better” ISA have a specific ESG focus?

The government is also pushing institutions such as defined contribution pension schemes to invest more of their default funds in longer term illiquid “productive finance” such as infrastructure and start-up companies, perhaps through Long Term Asset Funds. There are many challenges to overcome here as the Productive Finance Working Group has highlighted. Long Term Asset Funds will have notice periods, but pension scheme members expect daily dealing, creating pricing challenges and liquidity management issues, all of which will need detailed stress testing.

But if these are resolved, and if illiquids truly do deliver better returns, could there be an extension to individual retail investments within “Build back better” ISA wrappers? There would need to be safeguards including diversification and some form of advice.

Each of these “refinements” adds layers of additional complexity and couldn’t be introduced without proper thought and industry consultation. There are doubtless many risks alongside any benefits. But in the meantime, Rishi, how about it – doubling the ISA limit from next April would make some positive headlines.

Steven Cameron is pensions director at Aegon

The post Could a ‘Build back better’ ISA spur investment? appeared first on Money Marketing.

This is what an analysis of data from the Financial Conduct Authority by Salisbury House Wealth reveals.

In 2020, 388,363 ISA products were sold. It compares to 216,933 in 2019.

UK households have saved £184bn in bank accounts since March 2020.

Many people were able to save more as a result of the closure of hospitality venues and travel restrictions.

Yet, Salisbury House Wealth says that savers should be wary of putting too much of their money into cash ISAs. This is due to record low interest rates.

The Bank of England base rate of 0.1% and lack of competition between banks means that even the best ISAs offer only 0.6% interest.

Therefore, savers will struggle to get a good deal among cash ISA providers.

They will also see the value of their cash eroded over time due to inflation.

Salisbury House Wealth says once people have paid off expensive debt, they should invest into longer-term products.

This is to maximise savings in the future.

Salisbury House Wealth managing director Tim Holmes said: “The pandemic has helped many people build up a healthy amount of savings but people need to be smart about what they do with this.

“UK savers have traditionally overinvested in cash ISAs, which has resulted in the value of their savings decreasing substantially.”

“People should consider investing into a Stocks & Shares ISA, where they will retain the tax benefits of an ISA, with better returns over time.

“As always when investing, it’s important to stagger investments in equities and diversify your portfolio to minimise risk.”

ISAs enable people to invest or save up to £20,000 per year without incurring tax on interest or share dividends.

Any gains made on investments are also exempt from capital gains tax if the person decides to sell the assets.

Earlier this year, Freetrade reported a significant rise in ISA subscriptions with a 244% surge year-on-year.

The post Number of ISAs sold jumps 79% in 2020 appeared first on Money Marketing.

The uptick was driven by a 16% increase in the market value of funds held in cash.

This translates to cash ISAs now accounting for 51% of the market value.

Stocks and shares ISA holdings, meanwhile, accounted for 49% of the market value of ISA funds, down 9% on the year.

The total amount paid into ISAs increased by £7.1bn to £7bn, with £4.8bn extra invested in cash ISAs versus £1.6bn in stocks and shares ISAs.

Chart: Adult ISA fund market values

Analysts are enthused by the continuing popularity of ISAs.

But some have warned the reliance on cash ISAs means people risk having the real value of their fund “eaten away by inflation”.

AJ Bell senior analyst Tom Selby said those who held a significant proportion of their ISA in cash might have felt like they had “dodged a bullet” in March and April last year as markets tanked.

“However,” he added, “values have since recovered substantially, with the FTSE All share delivering whopping returns of 37% since April 2020 – a boon those invested in cash will have missed out on.”

Chris Cummings, chief executive of the Investment Association, said: “Comparing the strong ISA flows this April to the year before shows investors have been moving money into funds to make the most of tax incentivised savings and to deliver better returns amidst low interest rates on cash savings.

“The overall inflow to UK equities for a second consecutive month follows a sustained period of outflows and points to investor confidence continuing to grow as the UK looks to leave the pandemic economic consequences behind.

“In particular, the rising inflows to more domestically-focused UK Smaller Companies funds shows investors are increasingly positive that the post-Brexit UK economy will grow strongly as it opens up.

“In another strong month for responsible investment funds, savers invested £1.6bn, taking the total inflows to £13.5 billion over the last year – representing 30% of flows into funds.”

Chart: Number of Adult ISA accounts subscribed to during the financial year

The government data also showed the number of people subscribing to lifetime ISAs (LISAs) more than doubled year-on-year, from 223,000 to 545,000.

Selby said many of those who had invested prior to the pandemic will have used their LISA to buy a first home in 2020/21, driven to the market by the chancellor’s decision to slash stamp duty.

“The availability of LISA funds tax-free where they are used for a first home purchase will have helped thousands of people get a foot on the property ladder – and may also have combined with the stamp duty cut to drive the house price boom we have seen over the last 12 months,” he added.

In addition, around one million junior ISA (JISA) accounts were subscribed to in 2019/20 – the ninth full financial year since the scheme was launched – up from 954,000 the previous year.

Quilter financial expert Heather Owen hailed this as an “historic milestone” which shows “more and more parents value the generous subscription limits on offer and the ability to save for their children’s financial future”.

But she added, with a potential 18-year time horizon, it is “concerning that cash is king” when it comes to JISAs and cash accounts remain “vastly more popular” than their stocks and shares peers.

“While cash JISAs do generally provide returns above the rate of inflation, meaning account holders will not be losing money in real terms,” she said, “they will not benefit from potentially 18-years of investment returns.”

Earlier this week, NatWest announced it had launched a new junior Stocks and Share ISA (JISA) to help “offset the impact of inflation and low interest rates” on cash savings.

It said around 83% of UK parents currently saving for their children are doing so in cash, according to research by the bank.

Nearly half of these (46%) have simply opened a cash account. Meanwhile, only a quarter (23%) of UK parents are saving for a child via stocks and shares.

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