I have a couple of ISAs from my bank totalling about £80,000 but they are giving me such a low rate of interest it’s hardly worth having them. Can I find better places to put my money that will give a better return?

Jeremy Woodruff of Smith & Pinching responds:

ISAs are a form of tax wrapper into which you can save or invest, with your returns tax-free. What you have in your ISA can be varied according to your wishes and objectives, so it’s not essential to find alternatives to ISAs to improve the performance of your investments.

There are two principal types of ISA: Cash ISAs and Stocks & Shares ISAs. There are other ISA products including the Lifetime ISA, which provides the means to save for retirement or your first home, and Junior ISAs for children.

Cash ISAs are savings accounts paying interest on your money. I assume, from your question, that your funds are currently in a Cash ISA. The interest is tax-free because of the ISA wrapper, but interest rates are indeed low at the moment and so your returns will struggle to keep pace with inflation – especially now with prices rising so rapidly on all fronts.

Your initial investment is broadly safe – subject to the Financial Services Compensation Scheme limits – and you have a guaranteed return in the form of interest, but your savings will lose value in real terms over time because of inflation. You are unlikely to find significantly higher interest rates with alternative Cash ISAs or other savings accounts, although some fixed-term Cash ISAs rates may be a little better.

Stocks & Shares ISAs hold investments, and the returns come via investment growth, dividends or – for some investments such as bonds – interest payments. Growth in Stocks & Shares ISAs is dependent on market performance and not guaranteed, but they do have the potential to outperform inflation if you hold them for the long term and can avoid withdrawing funds when markets are at their lowest. The investments in your Stocks & Shares ISA can be tailored to suit your investment risk profile, although a very low-risk approach may bring compromises in terms of investment returns.

I suggest you discuss your investment planning with a Chartered Financial Planner to look at putting together a strategy that will deliver returns in line with your investment objectives. This may mean transferring some or all of your current ISA savings to other ISA products: do make sure that you do this under advice and using the correct ISA transfer process.

Any opinions expressed in this article do not constitute advice. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

For more information, please visit www.smith-pinching.com