Frequently asked questions

An ISA is a tax-efficient savings and investment account available to UK residents. It allows individuals to save or invest money without paying tax on the interest, dividends, or capital gains earned within the account. There are different types of ISAs to cater to various saving and investment needs, including Cash ISAs, Stocks & Shares ISAs, Innovative Finance ISAs, and Lifetime ISAs.

A Stocks & Shares ISA is a type of Individual Savings Account that allows individuals to invest in a range of financial products such as stocks, bonds, and funds. The key advantage of a S&S ISA is the ability to grow investments free from UK capital gains and income tax, up to a certain limit each tax year. The Saving Tool Advanced Default Strategy makes heavy use of S&S ISAs.

A Cash ISA is a type of Individual Savings Account that offers a tax-free way to save money. Similar to a traditional savings account, it pays interest, but the interest earned is not subject to UK income tax. Cash ISAs are often seen as a safer, more stable investment compared to Stocks & Shares ISAs, though they typically offer lower returns. The Saving Tool Advanced Default Strategy does NOT use Cash ISAs.

A Lifetime ISA is designed to help individuals save for their first home or retirement. UK residents aged 18 to 39 can open a LISA and contribute up to a set limit each tax year, receiving a 25% bonus from the government on contributions. Funds can be withdrawn tax-free to purchase a first home or after the age of 60 for retirement purposes. Early withdrawal for other reasons is subject to a penalty. The Saving Tool Advanced Default Strategy does NOT use Lifetime ISAs.

A Defined Benefit (DB) Pension, sometimes known as a final salary pension, provides a guaranteed retirement income based on your salary and the number of years you have been a member of the scheme. The employer bears the investment risk and is responsible for ensuring there is enough money at retirement to pay the promised benefits.

A Defined Contribution (DC) Pension is a retirement savings plan where both the employee and employer contribute to an individual's pension pot, which is then invested. The amount available at retirement depends on the contributions made, investment returns, and any charges taken from the pension pot. Unlike DB Pensions, the individual bears the investment risk.

Financial Independence refers to the state of having sufficient personal wealth to cover one's expenses, without having to work.