The solution if you can’t decide where to invest this year’s ISA allowance
Time is ticking to use up your £15,240 ISA allowance by midnight on 5 April. After this deadline, this year’s tax-free allowance is lost forever, so if you can, it’s important to squirrel away any spare money now.
If you’ve decided to invest in a stocks and shares ISA, don’t panic if you can’t decide which investments to choose. You have an alternative option.
ISA cash parks allow you to ‘park’ your money temporarily in an ISA on a platform.
By ‘parking’ your cash, you can secure the allowance for the current tax year even if you haven’t decided where to invest, giving you valuable extra time to research where you want to put your money.
Remember, your ISA allowance is given on a ‘use it or lose it’ basis so this temporary solution ensures you retain the 2016/17 limit for future years, sheltering more of your money from the tax man.
There’s no limit on how much money you can put in an ISA cash park but you are restricted to the annual ISA allowance of £15,240 for 2016/17 (£20,000 from 6 April 2017).
An important point for investors to note is that you won’t be earning any interest or return on money in an ISA cash park so once you have more time or you’ve done your research, you should look to move your money into shares or funds.
Will investment platforms charge for the ISA cash park?
Once you’ve set up an online account with an investment platform, your debit card will be linked to your ISA and you can specify that you want to put your money in an ISA cash park.
We contacted five major investment ISA platforms to find out if there are any charges associated with an ISA cash park and here’s what they told us:
AJ Bell: People can hold money in cash via their AJ Bell ISA while they decide where to invest and there is no platform charge on the cash element of their portfolio. We don’t call it a cash park but if you hold cash in our ISA there is no ISA fee. The ISA fee only applies to the proportion of the ISA held in funds or shares.
Bestinvest: We allow investors to hold cash on accounts if they want to make the most of their allowance now but don’t know exact investments yet. There is no charge for holding cash but the usual ISA fees will apply when it comes to investing, withdrawing etc. But there is no charge for opting for an ISA cash park if they do not know specific investments yet.
Fidelity: We do offer an ISA cash park and there are no fees associated with this.
Hargreaves Lansdown: The Hargreaves Lansdown ISA offers a cash park so ISA or SIPP investors who haven’t decided where to invest can still use their allowance before the end of the tax year and then select their investments at their leisure. There is no charge, set-up fee or platform fee for this facility.
The Share Centre: We do allow customers to hold cash before choosing investments, and there is no specific charge for customers holding cash as opposed to investments. The monthly admin fee on the ISA still applies, however. Although we allow customers to hold cash as well as investments within their ISAs, it is not technically a ‘cash park’.