If you're in your 60s and looking for a safe place to keep your money, then you could consider a Cash ISA. It's a tax-free savings account that gives your money protection from any type of tax as long as you continue to hold it with in the ISA wrapper.
Cash ISAs are low risk because your money is help on deposit just like a normal savings account. The only difference between a Cash ISA for the Over 60s and a savings account is that the money that grows in the Cash ISA does so tax-free, so there is no savings tax interest to pay ever.
Understand ISAs and Find the Top ISA account to meet your needs with our Uswitch guide.
Anyone over 16 can have a Cash ISA. The good news is that Cash ISAs are open to everyone, no matter what their age, so you can continue to open a Cash ISA or contribute to an existing Cash ISA each financial year. You can do this in your 60s, 70s, 80s and beyond. Unlike other financial products, such as mortgages, you can open an ISA at any time and hold it for as long as you want. There is no time limit to a Cash ISA and no age discrimination or restrictions.
Think of it as a long-term savings product that protects your money from tax. If you're over 60 you can open a Cash ISA and begin saving right away.
Find out more about Cash ISAs with our in-depth guide
You can save money into your Cash ISA each tax year. The tax year runs for 12 months between April 6 and April 5 the following year. In the 2020 to 2021 tax year you are allowed to put up to £20,000 of your money into a Cash ISA.
Everyone aged 16 or over can have a cash ISA (but for some ISAs, usually with stocks and shares options, you must be 18). Otherwise there's no age limit or preference to ISAs.
For many people, the lockdown due to Covid-19 has been very tough financially, and they have experienced job loss or furlough. However, people who are retired may already have savings and are looking for a home for their savings money because they have not been able to spend much in lockdown.
If you have savings built up and you do not think that you will need your money in a hurry, then a Cash ISA might be an option for you. If you think you will need the money in three to six months’ time, or less, then you are better off with in instant access savings account.
You can choose the right Cash ISA for you:
Easy access - no restrictions on withdrawing your money
Fixed-rate cash ISAs - the interest rate you get is fixed for a set term, usually between one and five years
Notice accounts - you will need to give notice if you want to access your money
Flexible Cash ISA - you're allowed to invest and withdraw money within a single tax year. Not all ISAs offer this option, so check before you sign up.
Alongside Cash ISAs, there are other types of ISA, which you can combine with your Cash ISA or have as standalone products.
These are Investment ISAs (sometimes known as Stocks & Shares ISAs), Lifetime ISAs (these help you save for your first home or retirement and are only available to the under 40s) and Innovative Finance ISAs, which carry more risk.
For more information about Cash ISAs read our guide.
In your 60s you will probably be thinking about retirement, you may have already started to work part time, or you may already be retired.
You will have been able to have access to your pension from age 55 under the pension freedom rules, and you may have other forms of savings as well.
A Cash ISA could be a good option for holding cash as part of a financial plan to hold investments and savings in a variety of places in order to diversify your risk.
An ISA can be a good way to boost your short, medium, or long term savings. The money in your Cash ISA will grow tax free, and you won’t have to declare the interest you earn to the taxman.
If you are Over 60 you may also want to consider a Stocks & Shares ISA, which invests in the stockmarket and could give your money the opportunity to grow at a faster rate than cash.
Stockmarket investments do, however, carry some risk and you may not get back what you invested. It depends on your financial position.
Some people in their 60s are happy to take some risk to grow their capital and investments. Whereas others feel that after retirement they want to find financial products that give them more security and protection. After all, you will probably be relying on your pension, and may not be drawing a salary in the future, so you may want to reduce your risk.
A Stocks & Shares ISA will give you the potential of stockmarket growth but your money could go up and down in value. Therefore if you do decide to explore this option, make sure you only invest money which you can afford to lose, and not nest egg savings or money you will need in the short term.
A Cash ISA could be part of your savings plans alongside other financial products, such as a pension. It is suitable for more risk-averse savers, and older savers who do not want to put their capital at risk.
Find out more about Investment ISAs.
Cash ISAs are secure and your money is protected by the government’s Financial Services Compensation Scheme (FSCS) up to £85,000 per account. If you choose an ISA with a high rate of interest and lock into that rate for a year or two, then you will be protected if interest rates fall during that time.
All the money within your ISA grows tax free, and that allowance can never be taken away from you.
Although you can shop around for the best rates on Cash ISAs, generally speaking interest rates are low at the moment because of current economic conditions.
Also, everyone has a £1,000 Personal Savings Allowance if they're a basic rate taxpayer, or £500 if they're a higher rate taxpayer. This means most people don't pay tax on their savings.
When you start to draw a pension your tax position may change, so it's a good idea to check how your change in employment, or retirement is likely to affect you.
The rules on savings could change in the future if the Personal Savings Allowance is withdrawn or reduced. That is why some people prefer to build up savings in a tax-free product where they will always have the guarantee that their money will remain tax-free.
That helps them plan better for the future as they know their allowances can't be taken away.
Find out more information on the tax advantages of Cash ISAs.
It's worth shopping around for the best cash ISA for over 60s. By using our comparison table and looking at the whole of the options in the market. Not just your local bank or building society, you can find the best rate.
Before you invest in a Cash ISA, make sure you have read all the terms and conditions. Are withdrawals restricted? Is the interest rate fixed? Can you make transfers into your over 60s Cash ISA?
You're only allowed to invest £20,000 each tax year, but you can continue to hold all the Cash ISAs you have opened in previous years.
After a while you may find that your best buy Cash ISA is less competitive. If this is the case, you may need to transfer your over 60s Cash ISA to a new provider. This is a simple process and you just need to ask your new provider to arrange the transfer.
There's no limit to the amount you have transfer from old ISAs into a new Cash ISA, but you do need to be sure that you make the transfer and not just close down your old accounts.
If you close them down, the tax advantages will be lost. If in doubt, ask your new provider before you make any changes – they will be able to help you.
In recent years savings rates in general have been very low, because the Bank of England base rate has been historically low for many years.
This means that Cash ISA savings rates, in common with many other savings products, are low at the moment. The best rates for Cash ISAs are constantly changing, as new products and providers add or change their rates.
That's why it's important to shop around and use our comparison table for the most up to date rates and offers.