A UK Individual Savings Account (ISA) is a bank account or share dealing platform where all of your interest and gains accumulate completely tax free. If you plan to save money, putting it into an ISA instead of a standard savings account can make a lot of sense. You can contribute up to £20,000 each year into an ISA, and thankfully there are a number of excellent providers available in 2020.
If you plan to save for the long run, it makes particularly good sense to go with a stocks and shares ISA. Although these come with more risk than a cash ISA, diversified global portfolios of stocks and bonds tend to produce better returns over long time horizons.*
Stocks and shares ISA investors are faced with an important decision. Which provider should they use? There are various options on the market, but not all of them are equal and each come with various pros and cons. This list takes a look at the advantages and disadvantages of various stock and shares ISA providers.
Hargreaves Lansdown is one of the UK’s biggest ISA providers and has been around for almost four decades. It is a trustworthy and high-quality provider with high-functioning desktop and mobile platforms that are easy to learn and work with effectively. They are also known for top-tier customer service. One downside of Hargreaves Lansdown is that their fees are relatively high compared to other providers. Other advantages include no fees for cash withdrawal or inactivity, no minimum deposits, quick setup for opening an account and free and easy ISA transfers.¹
Nutmeg is a relatively new UK based provider that attempts to keep everything as simple as possible. They allow you to choose between three different investment styles: Socially Responsible, Fully Managed, or Fixed Allocation as well as a number of different risk profiles. Once you’ve made your selections, they choose a globally diversified portfolio of funds to invest for you and continuously manage your profile of investments over time. Their fees vary depending on what investment style you go with. Overall, Nutmeg are a great choice for those who want to hold a wise portfolio of diversified investments in an ISA in a simple and manageable way.²
Vanguard is a great US-based company that provides a stocks and shares ISA service. They allow you to put your money into various pre-set portfolios of mutual funds, ETFs, and bonds chosen by their experts. Vanguard is known for their incredibly low fees and sound approach to wise long term investing. If you’re looking for a reputable and reliable provider with a quick set up process and user-friendly interface, you can’t go wrong with Vanguard. The one downside of Vanguard is that your investment options are limited to the funds they have selected, however these are still excellent options worth considering.³
IG is a UK-based ISA provider that has been around since the mid-1970s with a powerful and flexible online platform. IG’s standard share dealing ISA is likely best for those who are more experienced investors looking for more flexibility and control in their ISA investments.⁴ For savers interested in a simpler yet still financially sound solution, IG provides a Smart Portfolio ISA which automatically puts your savings into a fully managed and diversified investment portfolio based on your risk appetite.⁵
Evestor is another fairly new provider on the UK market that is rapidly gaining in popularity. They are extremely simple to get started with and allow investors to choose between three diversified portfolios of investments: low risk, medium risk, and high risk. If you go with the low risk portfolio, your gains won’t be as big but you’ll also be less likely to see big declines in value. On the other end, if you choose the high risk portfolio, you are more likely to see bigger gains over time, but there may be periods where you see big drops in value as well.
Signing up is quite simple and you can withdrawal at any time. You can track your investment performance using their simple and convenient mobile app available on both Android and iOS devices. One of the best things about evestor is that there is no minimum investment and you can get started with only £1. The main downside of evestor is that you can only invest into one of their three portfolios, however for those who aren’t investment experts this can be a good thing.⁶
Important Things to Remember
It is important to remember that the investments made in a stocks and shares ISA can go up and down in value. Positive returns do not come without risk and substantial losses are possible, so make sure to do thorough research before investing.
As always, before signing up with any new ISA provider it is wise to study the options for yourself. Each person is different and the perfect provider for one person may not be so good for another. Read reviews and assess the pros and cons of a few options so that you can be sure to sign up for the best provider for your situation.
*The information on this website is not intended to be, nor should be interpreted or understood as, financial advice. The website nor writers at wiserthinking.com are accountants, attorneys, nor financial professionals. The information contained on this website is not and must not be used as a substitute for financial advice from a professional. The content on this site is intended to be used and must be used for informational purposes only. Investments may go up and down in value and carry risk of substantial loss.
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