Stocks & shares ISAs could benefit savers while rates are low, says NFU Mutual Go compare with our comparison table

Stocks & shares ISAs could benefit savers while rates are low, says NFU Mutual

09 August 2010 / by Lois Avery

Savers are being encouraged to invest in equities because interest rates are so low, according to NFU Mutual.

Following the Monetary Policy Committee's (MPC) decision to hold the Bank of England base rate at 0.5% new research shows that savers are being drawn away from cash ISAs, which are struggling to offer competitive returns, to more lucrative investments.

Savers are now finding that the tax-free benefits of cash ISAs are not enough to offset the effects of inflation and a low rate market.

Instead NFU Mutual is suggesting savers look to invest their money instead.

Chris Linpow, investment specialist at NFU Mutual, explains why savers are giving alternatives to cash ISAs some serious consideration.

"More than 17 million British cash ISA savers are likely to be feeling deflated after the MPC chose to hold interest rates at 0.5% for the 18th consecutive month. This decision does not support savers and is likely to cause many to reconsider their long-term options,” he said.

"Cash ISAs don't offer the potential returns available on the stock market over the medium to long term, say five years or more. However money on deposit is secure and readily accessible.

"Many people do not think about the potential income available from equity investments, yet this can be a significant part of any returns available, be it withdrawn or reinvested.”

Although he did stress that these investments are often higher risk than cash ISAs but suggested that a stocks and shares Isa might be another option.

"Someone who has taken their full allowance of tax-free cash savings for each of the past 11 years could now have a substantial sum of money generating only modest interest.  A stocks and shares ISA could be a very effective way of potentially growing that nest egg over the next five years or more."

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The value of investments and any return from them can fall as well as rise and you may not get back the full amount invested. Please ensure that you read the Important Risk Information below.