Antonia Medlicott, founder and managing director of financial education specialists Investing Insiders, has warned that savers could be missing out on thousands of pounds by not researching their ISA and pension options. She compared the best and worst performing providers to highlight the potential impact.
ISA differences
Medlicott explained the different types of ISA portfolios, including adventurous, balanced, cautious, and conservative, with risk levels descending. She noted that the best-performing ISA over 10 years was in the adventurous category, with returns of 224.98 per cent, while the worst-performing was conservative, with returns of just 9.2 per cent.
She said that investing £10,000 in the highest-performing ISA 10 years ago would have grown to around £32,498, while the same amount in the lowest-performing would have increased by only £920. The difference is £21,578 over 10 years, and this gap grows exponentially over longer periods.
For a saver with an ISA pot of £50,000, the difference over 10 years would be over £100,000: £162,490 in the high-performing ISA versus £54,600 in the low-performing one.
Pension differences
Medlicott also highlighted that while workplace pension providers are often fixed, savers can control the fund and risk level. For high-risk portfolios, the best-performing fund had five-year cumulative returns of 180.28 per cent since 2020, while the worst saw losses of -98.59 per cent.
A £50,000 fund would have grown to £140,140 in the best fund but reduced to £705 in the worst, a difference of 19,778 per cent. A £10,000 fund would be worth £28,028 in the top performer or £141 in the worst.
For medium-risk funds, the best return was 79.81 per cent, and the worst was -46.31 per cent. Even low-risk funds showed a range from 39.34 per cent to -25.64 per cent.
Medlicott advised that early in pension saving, high-risk funds are often best, as there is time to recover losses. As retirement approaches, switching to low-risk funds can provide stability.
She concluded that being more invested in ISAs and pensions can have a huge impact, and making the right choices early sets up a strong financial future.
