Time to aim for higher returns

When it comes to taking investment risk to secure a higher return, those aged 55 and over are most likely to be taking the lead with Stocks & Shares Individual Savings Accounts (ISAs), according to research from Standard Life (08 April 2013). Over one in ten (11 per cent) of 55 and overs invest in the stock market via their ISA, compared to just 7 per cent of 35 to 44-year-olds.

A round two fifths (41 per cent) of UK adults are currently investing in Cash ISAs. However, less than one in ten (9 per cent) are investing in Stocks & Shares ISAs, despite low interest rates meaning that even tax-efficient Cash ISAs could be struggling to keep pace with inflation.

Reviewing your approach
With the Monetary Policy Committee (MPC) continuing to keep interest rates low and inflation relatively high, cash held in an ISA or a savings account could be eroded in real terms. So now might be worth reviewing your approach and, if appropriate, considering whether you could take more risk with some of your cash. You could potentially invest in the stock market instead, through a tax-efficient Stocks & Shares ISA, to try to beat inflation. However, it’s always sensible to keep some money in cash, where it is safe and you can get instant access to it.

Consider your options
For those individuals willing to take more risk with a proportion of their money, there is the option to consider using as much of the current annual £11,520 (2013/14) Stocks & Shares ISA allowance as they can this tax year. The annual ISA allowance is per individual. This means that a husband and wife, or registered civil partnership, for example, can invest up to £23,040 between them into ISAs this tax year.

The research from Standard Life (08 April 2013) also reveals men and women take a very different approach to their investments. Over one in ten (12 per cent) men currently save into a Stocks & Shares ISA, compared to only just over one in twenty (6 per cent) women. An equal percentage of men and women are currently saving into Cash ISAs (41 per cent for both).

ISA matters
Use as much of your current £11,520 (2013/14) ISA allowance as possible in this tax year. You can invest this full amount in a Stocks & Shares ISA so you have the chance of greater tax-efficient growth over the longer term. Investing regularly each month can help to smooth out any short-term ups and downs in the stock market.

Review your Stocks & Shares ISA investment regularly to make sure it is performing as expected. Reinvest to help generate more income. Remember that if you choose an ISA that generates income, you can reinvest this money as well as paying it into a bank account. This means you have the opportunity to continue to generate income based on your long-term investments.

Source: All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,059 adults. Fieldwork was undertaken between 25-28 January 2013. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).

Past performance is not necessarily a guide to the future. The value of investments and the income from them can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested. Tax assumptions are subject to statutory change and the value of tax relief (if any) will depend upon your individual circumstances.