Seven tips for boosting your ISA returns

ISAs, or individual savings accounts, are a great resource for building up a pot of money that can add to your financial security over time. However, that pot of money will become much larger if you understand how to make it work harder for you. The tips below will help you to supercharge your ISAs and give you the best possible returns.

1) Make a monthly commitment

Whether you choose an investment or a cash ISA, you don’t need a big lump sum to get started. Most providers will allow you to set up a monthly direct debit into your account, meaning that you’ll barely notice the money going out.

If you choose an investment product – such as a stocks and shares ISA – putting in a set amount each month can help take the stress out of natural stock market fluctuations. The value of investments tends to move up and down in the short term, but by making monthly deposits you can avoid the risk of putting all your money in just before a big drop. Financial advisers call this process ‘smoothing’, as it delivers a smooth progression of investment growth and risk protection over time.

2) Don’t forget the past

The humble ISA is nearly 20 years old, having been introduced in April 1999. It’s likely that many of us will have an old ISA or two knocking around, and may even have forgotten about them. 

Since the rates on many best-buy cash ISAs have dropped dramatically over time, and your old investment ISA might not be in the right funds for your current circumstances, it’s worth taking the time to evaluate your options.

The good news is that your ISAs can be rehabilitated, with most providers allowing for ‘transfers in’. This means you can seamlessly transfer an old ISA into a newly opened account. Just don’t withdraw the money – you’ll lose the ISA benefits – and  make sure you go through the proper transfer procedures. Your new provider should be able to help with this.

3) Take  (appropriate) risks

With UK interest rates so low at present and inflation high, the money in most cash ISAs and other savings accounts is effectively losing value in real terms every year. 

However, if you’re willing to tolerate some risk, historic returns suggest that stock investments perform better than cash in the long run. Just make sure the amount you invest is suitable for your risk tolerance – a financial adviser can help guide you if you’re unsure.

4) Review regularly

The ISA you have may not be the one you need. Cash ISA rates drop, investments fall out of favour, and your circumstances can change too. Ensure that you check the status of your ISAs at least once a year, and allocate your money elsewhere if necessary.

5) Tailor your ISA to your circumstances

Are you a first-time buyer or saving for retirement? A help-to-buy ISA or lifetime ISA comes with an additional government bonus of 25%, but, as their names suggest, they can only be used for specific life events

6) Ride your pay rises

If your wages rise or you finally pay off a long-standing debt, try not to get used to the extra income immediately. Instead, increase your direct debit into your ISA. You’ll end up with more savings without feeling the pinch.

7) Keep it diverse

If you choose an investment ISA, make sure you keep your eggs in a variety of baskets. Investing in shares across a range of countries and sectors, as well as holding other assets such as corporate or government bonds, will help ensure that your portfolio can ride out a market downturn in a specific asset class, sector or region of the world.

Want to know more about Stocks and Shares ISAs?

The UK tax year ends on 5th April each year. This is the deadline to make a deposit into your ISA using your annual allowance. Learn how you can open an ISA with us or transfer an existing ISA from another provider.

Learn more about Saxo ISAs