Can anyone talk me through ISAs?

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I feel like I’m fairly savvy with money and I look for good savings rates and move my and the children’s (limited) money around. But I need to confess that I don’t really ‘get’ the ISAs.

PIL asked me to open stocks and shares Junior ISAs for the children. I duly did so and they paid a small sum into both accounts. The money is split across a few funds like HL multi manager trusts and HL income funds and a few others. The platform is HL. Is the % shown in blue how much that fund investment has gone up by since the account started? Or each year? How can I compare the ISA to fixed interest accounts? Basically I can’t really tell if the money would be better off in traditional savings (or if their traditional savings would be better off in these ISA accounts?).

I also have a LISA with HL but the overall % increase is teeny tiny which makes me wonder what the point is!

Any advice or guidance is appreciated

ISA - individual savings account - is not so much a product in it's own right as 'wrapper' you can put around a certain amount of savings every tax year. For an individual the amount is £20,000 but (I think) there may be some other things with an ISA label.

Savings within the wrapper are free from tax on the income they produce or any gains of capital if you invest in shares etc.

Thanks for replying. I was maybe unclear though. I know what ISAs are but was wondering about how the %gain/loss is presented on the HL platform and whether it’s better to have ISAs or regular savings accounts for the children. For example, one ISA was opened over 5 years ago and a lump sum deposited and seems to have a gain of around 5%. Is that over the whole 5 years? In which case, the money would have earned more interest in a savings account.

Op I have bought sipp pensions with dc and am listening to lots of podcasts. I am not an expert but I think that many markets just haven’t gone up this year and these investments are more long term. Similarly dd1 got a government trust fund given out by the last gov - £250 invested - and over 15 years it has done better than if it were in a normal bank account because interest rates were low - but there have been years where it has gone down. I don’t do anything to it - just receive my annual statement every year. Sometimes you have to sit on your hands and watch things grow over time.

@stealthninjamum that’s interesting to know. I had looked at a pension for the DC but got a bit lost in it all! Who do you use for it?

I also wanted to add to my last post that I can do maths (!) but the 5% gain thing is a mystery because I can’t remember the exact amount PIL paid into it. Otherwise I could work back to see if it’s 5% over the whole 5 years etc.

I can’t answer your specific question about whether the 5% shown on your HL account is this year or overall. My hunch is that it is this year/the past 12 months, but the online Help should answer that question.

As regards whether the money would be better in an ordinary savings account, then unless you want to use it in the next five years, the answer is almost certainly No. If you do want to use it within the next 5 year, then a term savings account would be a good option. It removes the uncertainty that comes with the stock market (your investments can fall as well as rise), will pay more than you will get from instant access, and also makes sure you’re not tempted to dip into for other needs. That assumes you do have instantly accessible savings for emergencies, of course.

Over the longer term, stocks and shares almost always outperform traditional deposit accounts. But the performance of different funds varies widely. So put your energy into researching whether the fund(s) that yours/your kids’ money is in is doing well. Bearing in mind of course that past performance is no indicator of future returns - but if there are other funds which have consistently outperformed yours, it should be easy with the HL platform to switch the money to them while staying within the ISA.

You should be able to look at the transaction history on the HL account and see exactly how much was paid in and when.

I’m with fidelity, largely because they don’t charge us any fees. The array of funds on offer is a bit overwhelming as I’m not an expert but friends who know more than me keep telling me to relax! I just looked it up and one child’s funds have grown 8% since April and the others has declined by about 6%. We’re only talking small numbers at the moment about £500 invested for each child and interest on money not invested gets 3.25% which seems high - but my dds have a saving account with hsbc (attached to their current account) which was getting 3% a year ago so probably more now.

I have got them pensions because they have asd / adhd and I don’t trust them to not spend any money I give them at 18 - not because I’m a money expert!

5% doesn’t sound great but then interest rates have also been really low. I had a small cash ISA that I hadn’t touched and it had an interest rate of less than 0.5% gross and that was before covid.

Do both, sipp and isa.

I have HL ISAs and SIPPs for my children - their junior isa’s have outperformed any of my other savings/investments consistently over the last 10yrs.

if you’re looking at the gain/loss column % there’s an info icon you can hover over which explains how they calculate it. The ‘cost’ column is what you’ve bought them at so ‘investment’. They are usually super helpful if you phone to have anything explained.

you would only be able to transfer to cash within the ISA wrapper eg a fixed return cash ISA but I’d consider time left in the market until they 18 vs whether that makes sense

you could open a fixed cash isa in addition for their ‘traditional savings’ if they have enough ISA allowance left but bear in mind that would be locked away in ISA until 18 too

Remember that interest rates for savings up till now have been very low for years. Prior to the cost of living crisis and interest rate rises, they were hovering around 1-2% at most for a long time. So while you can get 5% on savings currently, you certainly weren't getting that 5 years ago. So if you've had 5% growth over 5 years, that is almost certainly more than you would have got in savings interest.

Junior ISAs are a very long-term investment, they will go up and down, but over a period of 18 years, they are very likely to outperform savings.

Thank you for all the answers!