Investors pause putting money in their Isas because of rising prices

A quarter of investors have pressed pause on their investments as they grapple with rising taxes, energy prices and fuel, according to a recent survey.

A snap poll by Interactive Investor revealed 24 per cent of people have already stopped paying into their long-term investment accounts to combat the rising cost of living.

While the majority of investors have not paused their long-term investments so far, the impact of the revised energy cap that came into play last week, along with rocketing inflation, suggest more will need to scale back on their contributions.

Savers are scaling back their long-term investments as the impact of rising living costs bites

The survey shows that stocks and share Isa contributions are top of the list of investments to cut back, with 8.5 per cent of respondents pausing payments, followed by savings account deposits, pensions and general investment accounts.

Just one per cent said they had stopped contributing to their children’s junior Isa suggesting people are prioritising their children’s financial security above their own.

‘It’s heartening that most people appear to be persisting with their long-term investments, despite the soaring cost of living,’ said Becky O’Connor, Interactive Investor’s head of pensions and savings. 

‘However almost one in four have already made some cuts to their usual Isa, pension or investment account contributions, which is a significant proportion. This may be an indicator of how bad things have already become as well as how high people expect living costs to go over the coming months.’

Jason Hollands, managing director of investment platform Bestinvest, has also seen the impact of soaring bills on people’s investments.

‘On the one hand, rising living costs are putting pressure on the ability of some people to commit to long-term savings and so I’d expect the overall UK household savings ratio – which hit record levels during the Covid19 lockdowns – to take a hit.

‘However, for those with larger cash savings – and the FCA reckons there are 8.6million people with more than £10,000 in cash – rampant inflation is destroying the real value of their savings which is a factor driving investment into financial markets, especially equities.’   

Research by Hargreaves Lansdown shows that investors are more nervous with markets and making different investment choices.

Some 31 per cent of those invested in a Hargreaves Lansdown Isa have put their money in cash, compared to 25 per cent in 2020 and 2021, and will decide where to invest once the outlook is clearer.

Recent data published by the Investment Association shows outflows from retail funds accelerated from £1.2billion in January to £2.5billion in February.

Emma Wall, head of Hargreaves Lansdown’s investment analysis and research said: ‘Investors should try to look beyond short-term events and focus on their long-term goals – riding out the storm is almost always a good strategy when things start to get rocky. 

‘Daily market moves are concerning, but we don’t think investors should panic. We think investors should take the time to make sure they have a diversified portfolio with a wide range of investments across different sectors and geographies.’

And experts warn that for those who are able to they should try to keep up with their contributions to their long-term investments, particularly their pensions.

‘If you’re finding yourself with a lower disposable income, have already cut out the luxuries you don’t need, shopped around to cut the cost of essentials to the bone, and are still struggling to pay your increased bills, then you may need to slow down your regular savings. 

‘But it’s worth thinking carefully before deciding to make this cut and where to cut it from,’ said Sarah Cole, senior personal finance analyst at Hargreaves Lansdown.

‘If you cut back on pension contributions, for example, the impact will be magnified, because you lose the government top-up and if you are in a workplace pension, you’ll miss out on the employer contribution too.’

O’Connor added: ‘It’s important not to cancel long term investments on a whim and to look at other possible areas to roll back on first. 

‘Future financial security is important and in cutting back on things like pension contributions now, people may be storing up difficulties for the future.

‘Anyone who has pressed pause on long-term investing for the time being needs to set a diary reminder to keep reviewing whether they are able to start again. It can be easy to forget resuming investments once you have fallen out of the habit or cancelled a direct debit. 

‘But it’s vital for anyone with a bit of spare cash left at the end of the month to put that to work and continue to keep one eye on future needs, even while current needs are so pressing.’

Compare the best DIY investing platforms and stocks & shares Isa

Investing online is simple, cheap and can be done from your computer, tablet or phone at a time and place that suits you.

When it comes to choosing a DIY investing platform, stocks & shares Isa or a general investing account, the range of options might seem overwhelming. 

Every provider has a slightly different offering, charging more or less for trading or holding shares and giving access to a different range of stocks, funds and investment trusts. 

When weighing up the right one for you, it’s important to to look at the service that it offers, along with administration charges and dealing fees, plus any other extra costs.

To help you compare investment accounts, we’ve crunched the facts and pulled together a comprehensive guide to choosing the best and cheapest investing account for you. 

We highlight the main players in the table below but would advise doing your own research and considering the points in our full guide linked here.

>> This is Money’s full guide to the best investing platforms and Isas 

DIY INVESTING PLATFORMS AND STOCKS & SHARES ISAS 

	Admin charge	Charges notes	Fund dealing	Standard share, trust, ETF dealing	Regular investing	Dividend reinvestment
AJ Bell YouInvest	0.25%	Max £3.50 per month for shares, trusts, ETFs.	£1.50	£9.95	£1.50	1% (Min £1.50, max £9.95)	More details
Bestinvest	0.40%	Account fee cut to 0.2% for ready made investments	Free	£4.95	n/a	n/a	More details
Charles Stanley Direct	0.35%	No platform fee on shares if a trade in that month and annual max of £240	Free	£11.50	n/a	n/a	More details
Fidelity	0.35% on funds	£45 fee up to £7,500. Max £45 per year for shares,  trusts,  ETFs	Free	£10	Free funds £1.50 shares, trusts ETFs	£1.50	More details
Hargreaves Lansdown	0.45%	Capped at £45 for shares, trusts, ETFs	Free	£11.95	£1.50	1% (£1 min, £10 max)	More details
Interactive Investor	£119.88 as £9.99 per month	£7.99 per month back in trading credit	£7.99	£7.99	Free	£0.99	More details
iWeb	£100 one-off		£5	£5	n/a	2%, max £5	More details
Freetrade	Free for standard account £3 month for Isa	Freetrade Plus with more investments is £9.99/month inc. Isa fee	No funds	Free	n/a	n/a	More details
Vanguard	0.15%	Only Vanguard funds	Free	Free only Vanguard ETFs	Free	n/a	More details
(Source: ThisisMoney.co.uk March 2022. Admin charges quoted annually, may be monthly or quarterly)