Investors desert cash in favour of self-select ISAs

New research from online stockbroker and fund supermarket Interactive Investor reveals that investors are increasingly looking for ways to boost their income and many are choosing the route of self-select ISAs.

According to the survey, the number of people only taking out a self select ISA has gone up by over half so far this tax year, to almost one in three (31%) of all investors, with a further 44% investing in funds ISAs or a mix (Cash and Self-Select). In addition, the number of people only taking out a cash ISA this year has dropped from 37% to 25%.

Rebecca O'Keeffe, head of investment at Interactive Investor, said: "Cash ISAs still have a valuable place in many people's overall tax planning and saving. However, where an investor has savings already and their primary intent is to generate income, they are increasingly looking at investment options within an ISA. This pronounced swing away from a cash only ISA is stark evidence of the effect sustained record low interest rates have had on demand. Cash ISAs were once seen as a solid source of income, but that image has been gradually eroded. With continued negative real rates of return, people are progressively exploring alternatives in the search for better returns."

The research from Interactive Investor also reveals that over four in ten (41%) investors are considering switching their holdings into a self-select ISA due to the low rates available on cash.

Rebecca O'Keeffe adds: "More and more investors are realising that self select ISAs offer real flexibility in the hunt for better returns. Depending on the level of risk investors are willing to take, they can invest in a mix of funds, shares, cash, or bonds. You can also trade ETFs within a self-select ISA, which are becoming increasingly popular among private investors looking for low-cost investment options.

"Savers should be sure that a move away from cash is right for them. A Cash ISA is still an invaluable way to save ‘rainy-day' money or for other known events. But, if you have sizeable savings and are prepared to take some risk, then a self-select ISA could be just what you need."