ISA Deadline: Third of investors leaving money on the table
A third of ISA investors left their stocks and shares ISA money in cash last year, sparking concerns that consumers are leaving money on the table as this year’s ISA deadline looms.
According to newly-released data from Hargreaves Lansdown, 31 per cent of their clients who had deposited money in a stocks and shares ISA left their money uninvested during the 2021/22 tax year.
This compares to 25 per cent during the previous tax year, suggesting that investors are becoming more cautious amidst ongoing market uncertainty.
Uninvested ISA money risks being eroded by the rising rate of inflation, and minimises the benefits to investors. Each year, taxpayers can shelter up to £20,000 in ISA accounts without paying tax on the returns. Investors can reinvest the returns and take advantage of compound interest over time.
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The 2021/22 financial year ends at midnight tonight (5 April).
Emma Wall, head of investment analysis and research at Hargreaves Lansdown warned investors that keeping their funds in cash while they wait for market certainty could mean missing out on gains.
“Remember that a well-balanced portfolio is the best way to combat market volatility, and should offer exposure to mix of higher-risk asset such as equities alongside lower-risk assets such as bonds,” Wall said.
“Funds focused on capital preservation, such as strategic bond funds, and multi-asset funds with a cautious approach are good additions to an equity portfolio if you struggle to navigate the uncertainty.”
Recent research from Peer2Peer Finance News found that Innovative Finance ISAs (IFISAs) outperformed the FTSE All-Share Index over the past four years, despite ongoing economic uncertainty and market volatility.
IFISAs returned an average of 9.01 per cent during 2021, while the peer-to-peer lending tax wrapper has delivered average annualised returns of between 7.8 per cent and 9.01 per cent every year since 2018.
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