Income investors who have built up savings in cash ISAs over the past decade may wish to consider rolling some of their holdings into Stocks & Shares ISAs, says Fidelity International.
With the Bank Rate at 1% the average rate on a Cash ISA is now only 2.1% so a saver with the average investment of £2,200 in a Cash ISA would receive a projected annual income of just £46.20.
This is less than half the projected annual income at the end of last year's ISA season of £105.82 when the interest rate on £142bn held in Cash ISAs was 4.8%.
However, Fidelity draws attention to the fact that since 6 April 2008 holders of Cash ISAs have been able to transfer money to Stocks & Shares ISAs. The new rules apply retrospectively so investors can transfer some or all of their Cash ISA money from previous tax years without affecting their annual ISA investment allowance.
"Everyone needs to retain monies on deposit of course, but for people relying on interest to provide an income, cash is no longer offering attractive yields," says Peter Hicks, head of UK retail sales at Fidelity International.
When interest rates were high, Cash ISA investors received relatively attractive income, tax-free for little or no risk while now, anyone who wants to maintain the level of income from their ISA investments will need to take on more risk, he says.IFAonline
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