Save, make, understand money


BLOG: Physical gold – the smart ISA alternative?

Joanna Faith
Written By:
Joanna Faith

Since they were introduced by Gordon Brown in 1999, tax-free ISAs have been savers’ go-to. Traditionally, ISAs have offered individuals high-interest rates and no tax on growth – a no brainer.

But in 2016, interest rates are low, the global stock market has crashed into a bear market, with a decline of over 20% and there’s even talk of negative interest, so an ISA is no longer the obvious choice it was. But what are the alternatives for savers today?

Investing in physical gold such as UK gold coins carries the same tax advantages as an ISA but none of the restrictive elements. There are no contribution restrictions, a gold investment is flexible and easy to liquidate without penalties and is not exposed to counterparty risk. In fact, gold tends to increase in value in times of uncertainty and volatility. While stocks have dropped by 20% this year and cash ISAs are paying around 1% on average a year, the price of gold has increased by 23%, inspiring many people to protect their savings by investing in this safe-haven asset. What’s more, given the continuing financial and political uncertainty, experts are predicting escalating demand for gold over the next few years, with many investors choosing physical gold as an alternative to traditional ISA savings.

Topping up your pension or SIPP is another alternative to saving through an ISA. If you are saving for the long-term, you can benefit from tax relief on pension contributions and any growth is tax-free. You could also invest in property or add physical gold bullion to your SIPP, which reduces counterparty risk. However, the drawback is that your funds are locked in until retirement, which is generally a less flexible arrangement than an ISA.

We’re all looking for a safe bet for our savings – an investment that is flexible, secure and likely to grow. For a long time ISAs have been the ideal choice for many savers but in the current market, many are evaluating the alternatives.

Physical gold comes with all the benefits of an ISA and many more besides. The “smart money” including the banks, hedge-funds and many of the advised high-net worth individuals are taking advantage of gold’s buying opportunity. With positive predictions for growth over the next few years a boost in demand for this tax-efficient precious metal is expected, which is therefore likely to continue this upward trend over the long term.

Joshua Saul is director of The Pure Gold Company