Why a Stocks and Shares ISA, and not a Cash ISA, could help you beat the State Pension

first_img Enter Your Email Address Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Simply click below to discover how you can take advantage of this. Peter Stephens | Saturday, 22nd February, 2020 I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Saving for retirement through a Cash ISA may not be the most effective means of beating the State Pension. Certainly, living within your means and building up a retirement nest egg is a great idea. But accepting the low returns of a Cash ISA while the stock market offers a better chance of long-term capital returns could be an ineffective use of your capital.As such, now may be the right time to switch your focus from a Cash ISA to a Stocks and Shares ISA. Through diversification, you could limit its risks and generate higher returns which reduce your dependency on the State Pension in older age.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Capital growth potentialA Stocks and Shares ISA offers a greater opportunity to generate capital growth than a Cash ISA. Over the past decade, for example, the FTSE 250 has recorded an annualised growth rate of around 9%. When its dividends are added to that figure, it’s a total return in excess of 12% per year.Over the same time period, a Cash ISA is likely to have posted annual returns that are less than 2%. At present, for example, it’s difficult to obtain a rate of more than 1.25% on a Cash ISA.In terms of planning for retirement, the difference between the returns available from a Stocks and Shares ISA and a Cash ISA could be significant. Over time, the impact of compounding is likely to widen them yet further. For example, over a 10-year time period, a £1,000 investment in the FTSE 250 — which delivers an annual growth rate of 9% — would be worth £2,367. The same investment in a Cash ISA yielding 1.25% would be worth just £1,132.Possible challengesOf course, many savers are dissuaded from opening a Stocks and Shares ISA because of perceived higher costs, complexity and risks. In terms of costs, the rise of online sharedealing means that annual management fees are minimal, while the cost of buying shares can be as low as £1.50 in a regular investment service.Buying shares is riskier than holding cash in terms of there being a potential for losses. But through diversification, you can reduce overall risk. Furthermore, the stock market has always recovered from its downturns to post new record highs. As such, adopting a long-term strategy can lead to high returns – even if there are challenges along the way.Moreover, with a Cash ISA offering such low returns, it may fail to match inflation over the long run. This could reduce your spending power and mean you remain dependent on the State Pension in older age. This could be viewed as a significant risk – especially with the State Pension age set to rise and its payment unlikely to provide financial freedom for most people in older age.As such, now may be the right time to focus your capital on a Stocks and Shares ISA rather than a Cash ISA. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Image source: Getty Images. Our 6 ‘Best Buys Now’ Shares Why a Stocks and Shares ISA, and not a Cash ISA, could help you beat the State Pension “This Stock Could Be Like Buying Amazon in 1997” See all posts by Peter Stephenslast_img

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