Following the theme of exploring the various savings vehicles offered by workplace pension providers, our latest insight article looks at Cash and Stocks & Shares ISA accounts, what products providers offer and how members can make contributions.
There are many savings vehicles on offer from workplace pension providers. Two of the most common saving vehicles on offer are Cash ISA and Stocks & Shares ISA (otherwise known as Investment ISA) accounts.
A cash ISA is similar to a regular savings account, but there is no tax to pay on any of the interest you earn on contributions up to £20,000 per tax year. There are different forms of Cash ISA, most commonly fixed rate ISAs or variable rate cash ISAs.
Our data shows that there are 10 workplace pension provider propositions who currently offer a Cash ISA, half of whom are offering their own product with other providers offering products from third parties.
Chart 1: Cash ISAs available to workplace pension members
Eight of these ten providers allow members to make contributions at source via a payroll deduction. The two who do currently not are Aviva Designer and Hargreaves Lansdown. As referenced before, this could be the most favored option for many members.
Other than Aviva Designer, all the workplace pension providers who offer Cash ISAs allow the member to make additional payments when wanted (one off or instant savings).
Cash ISA payments can be made either via app/portal, direct bank transfer, via the employer/payroll or via direct instruction via call/email.
Chart 2: How can Cash ISA payments be made?
Currently there are no workplace providers who can facilitate contribution methods via rounding-up, algorithm-based prediction savings, or sweeping of surplus income.
Aviva My Money, Aviva My Money Master Trust, Cushon and True Potential also allow contributions to be paid to a Cash ISA account by the employer. This means that they are able redirect payments which are above the Auto-Enrolment min requirements into the ISA rather than the pension. This is great and can see why this could be very attractive, particularly to younger savers.
Aviva My Money, Aviva My Money Master Trust, Cushon, Hargreaves Lansdown, Standard Life, Standard Life DC Master Trust and True Potential also offer the option for member to apply a ‘contribution holiday’, where the member can stop or pause savings during times of difficult or months with abnormally high spending. Again, a very welcomed feature during the current cost-of-living crisis.
Our data also shows that there are eight providers who can accept a transfer from another ISA into the Cash ISA products they offer, however only via a manual process . These providers are Aviva My Money, Aviva My Money Master Trust, Cushon, Mercer Master Trust Aviva, Mercer Master Trust Scottish Widows, Standard Life, Standard Life DC Master Trust, and True Potential.
A Stocks & Shares ISA, otherwise known as an Investment ISA, is a tax-efficient investment account similar to a Cash ISA. The difference being that the money within the account is invested rather than held in cash.
These ISA accounts are generally more popular for longer-term saving as the saver needs to be prepared for the value of the investment to fall as well as to rise.
Income made on investments held within a Stocks & Shares ISA can either be withdrawn, reinvested back into the investment they have come from, or be held as cash within the account. Some funds will only allow savers to reinvest their income.
Our data shows that other than Aviva Designer and Royal London, all workplace pension providers offer at least one Investment ISA to their members. Most providers offer their own product.
Chart 3: Investment ISAs offered to workplace pension members
Other than True Potential, all of the Investment ISAs on offer allow contributions to be made at source via a payroll deduction.
All of the Investment ISAs on offer allow the member to make additional payments when wanted (one-off or instant savings). These can be made via app/portal, via direct bank transfer, via the employer/payroll, or via direct instruction.
Chart 4: How can additional payments be made into Investment ISAs
There are currently no providers who offer Investment ISA savings via rounding-up, algorithm-based or prediction savings, or sweeping of surplus income.
The majority of providers who offer an Investment ISA allow contributions or additional payments to be made into the plan by the employer. The providers who do not are Mercer Master Trust (Aviva), Mercer Master Trust (Scottish Widows)and Standard Life.
Other than Mercer Master Trust (Aviva) and Mercer Master Trust (Scottish Widows) all Investment ISAs on offer via workplace pension providers have the option for users to apply a contribution holiday i.e. the member can stop or pause savings during times of difficulty or months with abnormally high spending.
Other than Legal & General and Legal & General Master Trust, the Investment ISAs on offer all accept a transfer from another ISA. Most do this via an automated process, but for Aviva My Money, Aviva My Money Master trust, Fidelity and Fidelity Master Trust this is a manual process.
Next week we will conclude this series of insights looking at Junior ISAs and cash deposit accounts.