Savings vehicles – what ISA products are available from providers and how do they work? (1/2)

With the end of the tax year approaching, the deadline for using an ISA allowance is 5^th April 2022.  

In this insight article we look in more detail at the various ISAs offered by workplace pension providers and how members can save into them. This first instalment looks at Cash ISAs, Investment ISAs and Junior ISAs.

The Coronavirus pandemic has thrown the finances of the nation into the spotlight, with many Brits forced to dip into their savings to make ends meet. With the advent of Open Banking, workplace pension members are increasingly used to seeing their financial vehicles through a smaller number of platforms. It is perhaps, therefore, no surprise that members are increasingly looking for far more than just a pension scheme from their workplace pension provider.

Individual savings accounts (ISAs) are one of the most popular forms of saving in the UK and therefore it is not surprising that one of the most common form of workplace savings products offered by pension providers is the workplace ISA.

ISAs allow UK savers over the age of 16 to save up to £20,000 every year without paying any tax on the interest earned. The allowance is refreshed in April every year. It is possible to have several ISA accounts open at the same time, but the £20,000 limit applies across all forms of ISA accounts.

There are four main forms of ISA account: the Cash ISA, the Stocks and Shares ISA (otherwise known as an Investment ISA), the Junior ISA, and the Lifetime ISA account.

Cash ISAs allow savers to protect their interest savings in cash without having to take any form of investment risk. They are easy to open, and funds can be easily accessed when needed, although some penalties may apply.

Our data shows that seven workplace pension providers offer a Cash ISA to their members. These seven providers are Aviva My Money, Aviva My Money Master Trust, Hargreaves Lansdown, Cushon, Mercer Master Trust Aviva, Mercer Master Trust Scottish Widows and True Potential.

Aviva My Money, Aviva My Money Master Trust, Hargreaves Lansdown and True Potential offer their own product. Mercer Master Trust Scottish Widows offer a product from Scottish Widows. Mercer Master Trust Aviva offer a product from Aviva. Cushon offer a product from Metro Bank but are also adding a number of other providers, however, the account still sits within Cushon.

Other than Hargreaves Lansdown, all the Cash ISA solutions allow for contributions to be made at source via a payroll deduction. This can make saving easier for less disciplined savers as the money will never enter their bank account.

All Cash ISA solutions from workplace pension providers allow the member to make additional payments when wanted ie one-off or instant savings. Aviva My Money, Aviva My Money Master Trust, Cushon, Hargreaves Lansdown and True Potential enable payments via the app or portal or via direct contact such as a call or email instruction.

Aviva My Money, Aviva My Money Master Trust and Cushon members can also make on-off savings via direct bank transfer or via the employer/payroll.

Mercer Master Trust Aviva and Mercer Master Trust Scottish Widows members are restricted to making one-off payments to their Cash ISA via the employer and/or payroll provider.

For members of Aviva My Money, Aviva My Money Master Trust and Cushon, additional payments can also be made by the employer into the Cash ISA plan.

Savers may find that at certain times of year they find themselves short of cash. Our data shows that Aviva My Money, Aviva My Money Master Trust, Hargreaves Lansdown, True Potential and Cushon all allow members saving via their Cash ISA to apply a contribution holiday where the member has the freedom to pause savings during times of difficulty.

Other than Hargreaves Lansdown, all workplace pension providers offering a Cash ISA are also able to accept transfer from another ISA via a manual process.

The most frequently offered form of savings vehicle offered to workplace pension members it the Investment (stocks and shares) ISA.

A stocks and shares ISA (otherwise known as an Investment ISA) gives the consumer tax-free returns on their investment. Investment decisions are made by a fund manager. As they are a form of investment there is a level of investment risk attached.

Our data shows that other than Aviva Designer and Royal London, all workplace pension providers offer an Investment ISA to their members.

The majority offer their own solution. However, some providers with an affiliation to a larger investment group use the investment group as a third-party solution. Mercer Master Trust Aviva offers a solution from Aviva, Mercer Master Trust Scottish Widows offers a solution from Scottish Widows, and Standard Life and Standard Life DC Master Trust offer a solution from parent group Standard Life Aberdeen.

Most allow for contributions to be made to the Investment ISA at source via a payroll deduction. Only Aegon Master Trust, Standard Life, Standard Life DC Master Trust and True Potential do not.

Other than Aegon Master Trust, all workplace pension providers who offer an Investment ISA allow the member to make additional payments when wanted on an ad-hoc basis.

Ten providers (Aegon Workplace ARC, Aviva My Money, Aviva My Money Master Trust, Cushon, Fidelity, Fidelity Master Trust, Hargreaves Lansdown, Legal & General, Legal & General Master Trust and True Potential) also allow additional payments to be made by the employer into the Investment ISA plan.

Other than for Mercer Master Trust Aviva, Mercer Master Trust Scottish Widows, Standard Life and Standard Life DC Master Trust, workplace pension members saving into an Investment ISA via their pension provider also have the option to pause savings by taking a contribution holiday.

Most providers will also accept a transfer from another ISA. Legal & General and Legal & General Master trust however will not. The remainder are fairly evenly split between automatic and manual transfer.

Junior ISA is another savings vehicle offered by workplace pension providers. A Junior ISA works similarly to a traditional ISA but is set up by a parent or guardian specifically for saving for their child’s future.

Anyone can pay into a Junior ISA, up to a maximum of £9,000 a year, tax free. Like a Cash or Investment ISA, there is no personal income or capital gains tax to pay on any growth/interest earned.

Our data shows that seven workplace pension providers offer a Junior ISA to help their members save for their children’s future. Those seven providers are Cushon, Fidelity, Fidelity Master Trust, Hargreaves Lansdown, Legal & General, Legal & General Master Trust and True Potential, all of whom offer their own products.

Fidelity and Fidelity Master Trust have the option for Junior ISA savers to apply a contribution holiday and pause savings during times of difficulty. Only Cushon allow for contributions to be made to a Junior ISA at source via a payroll deduction. It is also the only provider to allow additional payments to be made by the employer. All seven providers offering a Junior ISA allow the member to make additional payments when wanted.

Other than Legal & General and Legal & General Master Trust, all workplace providers offering a Junior ISA can accept a transfer from another ISA. Cushon, True Potential and Hargreaves Lansdown do this via an automated process. Fidelity and Fidelity Master Trust use a manual process.