What is a Stocks and Shares ISA?

Traditional pensions are no longer the only financial products available to those saving for their retirement years. Increasingly, people are supplementing their pension pots with other income sources, too, with a wider array of investments and savings products to choose from than ever before.

One popular choice for retirement savers is the investment-based Stocks and Shares ISA.

But how does a Stocks and Shares ISA work, and why could it be a strong choice for pension planners?

Breaking down the Stocks and Shares ISA

The term ‘ISA’ – or Individual Savings Account – is often associated with the cash savings account offered by banks or building societies. In an ‘ISA’, any interest earned on savings is exempt from UK income or capital gains tax.

The Stocks and Shares ISAs work similarly to Cash ISAs and are also tax exempt. However, rather than earning a fixed rate of interest, your money is invested across a portfolio, which offers the potential for higher returns.

Since investing over a longer period gives them a greater opportunity to outperform a standard cash ISA, these ISAs are typically recommended for the long haul, making them potentially a good choice for retirees.

There is a limit to how much money you can contribute each year, though. For the 2024/2025 financial year, you can add £20,000 across your ISA products – this includes Cash, Stocks and Shares, Innovative Finance, or Lifetime ISAs.

It’s important to remember though that any form of investing carries a risk, and returns are therefore not always guaranteed.

Talk it through with a professional

Ahead of making any big decisions about your retirement planning, it’s important to remember that pension planning is far from one-size-fits-all. The perfect retirement portfolio is wholly dependent on your individual circumstances. So, talking to a professional first, like the team at My Pension Expert, ahead of moving your retirement savings is key.

An independent financial adviser (IFA) will be able to talk to you about the best stocks and shares ISA, or the best pension product, in general, for you. They’ll work backwards from your end goals to create a savings plan that’s tailored to your personal needs, preferences and appetite for risk.

To find out more about Stocks and Shares ISAs and whether they could work for you, contact us today.