Are you holding too much cash in your ISA? Are you holding too much cash in your ISA?

In a survey of financial advisers by Octopus Investments, three-quarters of respondents said they believe their clients hold too much in their cash ISA relative to the rest of their portfolio. The majority (83 per cent) feel their clients are put off investing in stock and shares due to the risk of losing money, followed by concerns of an overstretched (49 per cent) and volatile (46 per cent) market.


Octopus said it carried out an online survey of nearly 600 UK advisers on cash ISAs from 20 December 2017 to 10 January 2018.

Could now be the time to look beyond cash and stocks and shares?

Octopus added that its new research provides fresh insight into how independent financial advisers view their clients’ ISA habits.

The investment manager argues that the surveyed advisers are correct in their assumption, with only one in seven (15 per cent) adults planning to invest in a stocks and shares ISA this coming tax year (2018/19), according to a parallel survey of UK adults.

The alternate online survey was also carried out by Opinium, a strategic insight agency of over 2000 UK adults, from 28 December 2017 to 2 January 2018.

While an equal number of adults are concerned with losing money (33 per cent) and volatility (32 per cent), many also worry about the level of returns (20 per cent).  Some also do not feel they are informed enough on the market (23 per cent), [Editor: as a generalisation, a growing sentiment among investors].

These anxieties aren’t restricted to the stock market.

While 48 per cent are planning to invest their ISA allowance this coming tax year (2018/19) in cash, low interest rates are deterring many savers – nearly two-thirds (61 per cent) listed returns as something that has, or would, put them off investing more in a cash ISA next year.

The recent research suggests that both advisers and their clients are struggling to find a solution that they are comfortable with for their ISA planning, Octopus said.

Paul Latham, the managing director of Octopus Investments, said, “It seems like Britons have an uneasy relationship with their ISAs. While cash unsurprisingly remains a favourite, our research shows that holding too much cash within an ISA seems to be a concern for many advisers and investors alike.

“But, at the same time, there seems to be a widespread reluctance on the part of investors to put their ISA pot to work in the stock market – driven by concern around market volatility, and the prospect of returns outweighed by the fear of loss. You could say that investors are stuck between a rock and a hard place.

“Understanding the full suite of ISA options out there has arguably never been more important. Beyond cash and stocks and shares, alternative ISA options  like the Innovative Finance ISA could prove helpful for those clients who want the potential of attractive returns outside of equities.

“People should view an ISA for what it is – a tax wrapper under which they can hold a range of investments. Whether that be cash and stock and shares, as well as VCT and P2P products. Octopus Choice, for instance, invests in property-backed loans to target a return of around 4 per cent, with a minimum investment of as little as £10.”

Peer to peer loans were confirmed as ISA qualifying investments for the Innovative Finance ISA at the Summer Budget 2015; it was launched on 6 April 2016, with the aim of increasing the choice and flexibility available to ISA investors, while encouraging the growth of peer-to-peer lending and improving competition in the banking sector by diversifying the available sources of finance.

Investors can divide their ISA allowance (currently £20,000 for the 2017/18 tax year) across multiple forms of ISAs, including – but not limited to – cash, stocks and shares, and Innovative Finance ISAs as they wish. However, they can only open one of each type within each tax year.

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