Trading 212: Cash or Stocks & Shares ISA?

Trading 212 have announced a new Cash ISA offering 5.2% paid daily. Sitting alongside their Stocks & Shares ISA, we explore the options to ensure you pick the right option for you.

Update: The Trading 212 Cash ISA has been released and we believe it is The Best Cash ISA on the market.

Trading 212 are a fintech company known for their commission free trading platform. With over 2.5m accounts globally, and over £3.5b invested, they are quickly becoming a household name in the financial world.

They offer a Stocks and Shares ISA which has become popular in the UK owing to commission free trades and no ongoing platform cost unlike some of the ‘big name’ brokers.

In an email to customer on 8th May 2024, Trading 212 announced their rumoured cash ISA.

The simplest way to save Coming Soon Combine the benefits of high interest, no fees, and tax relief in one simple account, the 212 Cash ISA What’s a Cash ISA? Individual Saving Accounts (ISAs) let you save tax-free. Any income you make in an ISA is tax-free. A Cash ISA is an ISA account where you can only hold cash. Key features of the 212 Cash ISA 5.2% interest (variable), paid daily Withdraw anytime No account fees Start with just £1, no minimums £85,000 FSCS protection

Whilst the ISA is still billed as ‘coming soon’, the 5.2% rate is at the time of writing the best rate on the market for an easy access cash ISA.

Easy access means you can withdraw without penalty anytime, so no fixed terms. You’ll always be able to get your hands on your money.

Interest paid daily is also a nice perk, as you won’t have to wait to receive a single lump sum, once a year. Note, this is not 5.2% daily as I’ve seen some people assume, rather 5.2% yearly, but paid out in daily chunks. Like most ISAs without a fixed term, this rate is variable and will go up and down with the Bank of England Base Rate.

We’ve discussed the different types of ISA as part of our blog on UK ISA Rules for 2024. Investments in Stocks and Shares ISAs generally return more over the long term, but have much more volatility. Cash ISAs will typically return less over time, however offer a guaranteed return.

Interestingly, Trading 212 offer the same 5.2% rate on uninvested cash in a Stocks and Shares ISA. This means you could effectively make your own Cash ISA by simply leaving all your funds uninvested in the Stocks & Shares ISA.

Up until this announcement from Trading 212, I expect some people were doing just that – the 5.2% rate being too good to turn down.

The Trading 212 Cash ISA benefits from the FSCS protection on the first £85,000 you invest. This means that should Trading 212 go bust, you get your money back.

To gain the 5.2% interest rate on uninvested cash with the Stocks and Shares ISA, you must opt into using Qualifying Money Market Funds (QMMFs). These are mostly short-term, low-risk financial assets treated as cash equivalents. These are technically still an investment, so you do not benefit from the FSCS protection, however the chances of you losing your money here are extremely low.

The Trading 212 Cash ISA is also a flexible ISA meaning you can withdraw funds and deposit again without impacting your ISA allowance. Trading 212 intend for the Stocks and Shares ISA to also become flexible, which is a great if you are unsure of future financial obligations.

The UK ISA rules changed in 2024 so you could open one of each type of ISA with Trading 212.

I expect many already familiar with Trading 212 will stick to their Stocks and Shares ISAs, however the addition of a very good rate for the Cash ISA is sure to attract new customers to the platform.

Should you be more comfortable with a cash, at launch this will be the best paying Cash ISA on the market. If you are comfortable with Stocks and Shares I expect this won’t change your plans.

Over time, we may see Trading 212 using this Cash ISA as a way to attract more people to their investing accounts.

For me, I like having a balance between my Cash ISA and Stocks and Shares ISA. Sadly my Cash ISA is locked away for another year, but when that fixed term ends I’d certainly look at migrating to Trading 212’s Cash ISA should the rate still be market leading.