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Capital at risk. All investments carry a varying degree of risk and it’s important you understand the nature of these. The value of your investments can go down as well as up and you may get back less than you put in. Where we promote an affiliate partner that provides investment products, our promotion is limited to that of their listed stocks & shares investment platform. We do not promote or encourage any other products such as contract for difference, spread betting or forex. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK. Accurate at the point of publication.
Investment platforms offer a means of buying and selling shares and funds directly, rather than through a financial adviser.
However, investors have the option to keep their contributions in cash. Hargreaves Lansdown, one of the main platforms, says nearly 40% of its stocks and shares ISA investors are doing so, and this trend looks set to continue given volatility in stock markets and interest rates soaring to a 15-year high.
Let’s take a closer look at which investment platforms are paying the highest interest rate on uninvested cash.
How does interest on uninvested cash work?
There are two ways in which investors can hold cash in a stocks and shares ISA (S&S ISA).
One option is to make a cash contribution to an ISA as part of the annual allowance ( £20,000 in the 2023-24 tax year) but leave it uninvested rather than using it to buy shares or other investments. Alternatively, investors could sell investments and leave the cash proceeds uninvested in their S&S ISA.
Contributions to a self-invested personal pension (SIPP) may also be held as cash, as may contributions to a standard shares trading account.
Holding cash in an S&S ISA or SIPP differs from using a cash ISA, which is an interest-paying savings account with no shares involved at any stage.
With competition among investment platforms hotting up, a growing number of platforms have started paying interest on uninvested cash over the last few years. However, it’s worth checking as not all platforms offer this benefit.
How is the interest rate calculated?
Most platforms offer a tiered interest rate on uninvested cash, which increases with the value of cash held. For example, investors might receive 3% on the first £10,000, 3.5% on the next £20,000 and 4% on balances above this.
Interest rates are quoted as ‘gross’ or ‘AER’ (annual equivalent rate). The AER takes into account the effect of compounding interest, meaning that if interest is paid monthly (or more than once a year), the AER is generally higher than the gross interest rate.
Many of the providers pay higher interest rates on SIPPs than ISAs, so let’s take a look at which of the major platforms pay the highest rates of interest by account.
Who pays the highest interest rate on ISAs and trading accounts?
The table below shows the current interest rates paid on ISAs and trading accounts by provider, ordered on a high-to-low basis for cash balances between £10,000 and £49,999.
Bestinvest tops the table by some margin, paying 4.35% interest on all cash balances, followed by Fidelity at 3.35%. Although Freetrade is in third position, interest is only paid on cash balances of up to £4,000 under the Plus Plan.
The interest paid by eToro is tiered by the value of the overall portfolio, not the cash balance. This means that investors with a portfolio exceeding $50,000 are able to access an interest rate in excess of 5%.
Please see below for detailed rates by provider
Who pays the highest interest rate on SIPPs?
The table below shows the interest rates paid on SIPPs by provider, ordered on a high-to-low basis for cash balances of between £10,000 and £49,999.
Once again, Bestinvest is in first place, paying 4.35% interest on all cash balances, followed by AJ Bell, Hargreaves Lansdown and interactive investor, paying 3.70%, 3.65% and 3.50% respectively.
Please see below for detailed rates by provider.
What are the interest rates by provider?
The current interest rates by provider are as follows:
AJ Bell
Pays interest on a tiered basis:
S&S ISA, Lifetime ISA, Junior ISA & Dealing account
- £0-£10,000: 1.95%
- Above £10,000: 2.45%
SIPP & Junior SIPP
- £0-£10,000: 3.20%
- Above £10,000: 3.70%
Bestinvest
Pays interest of 4.35% on all accounts.
Charles Stanley Direct
Pays interest on a tiered basis for an ISA, Junior ISA, Investment Account and SIPP as follows:
- £0-£49,999: 2.50%
- £50,000-£99,999: 2.70%
- Above £100,000: 2.90%
eToro
Pays interest based on the tier balance (being total value of investments and cash less excluded products) as follows:
- Below $10,000: no interest
- Gold (above $10,000): 2.0%
- Platinum (above $25,000): 2.4%
- Platinum plus (above $50,000): 5.0%
- Diamond (above $250,000): 5.3%
Fidelity
Pays interest of 3.35% on a S&S ISA, Junior ISA, Investment Account, Cash Management Account, SIPP and Junior SIPP.
Freetrade
- Basic Plan: no interest paid
- Standard Plan: 1% interest on a maximum of £2,000 cash
- Plus Plan: 3% interest on a maximum of £4,000 cash
Hargreaves Lansdown
Pays interest on a tiered basis:
S&S ISA, Lifetime ISA & Junior ISA
- £0-£9,999: 2.75%
- £10,000-£49,999: 2.95%
- £50,000-£99,999: 3.20%
- £100,000 plus: 3.70%
Fund & Share Account
- £0-£9,999: 1.50%
- £10,000-£49,999: 1.70%
- £50,000-£99,999: 2.00%
- £100,000 plus: 2.20%
SIPP & Junior SIPP
- £0-£9,999: 3.45%
- £10,000-£49,999: 3.65%
- £50,000-£99,999: 3.90%
- £100,000 plus: 4.20%
IG
Does not pay interest on cash balances.
interactive investor
Pays interest on a tiered basis:
S&S ISA, Junior ISA & Trading Account
- £0-£10,000: 1.75%
- £10,001-£100,000: 2.75%
- £100,000 plus: 3.75%
SIPP
- £0-£10,000: 2.75%
- £10,001-£100,000: 3.50%
- £100,000 plus: 4.00%+
Trading 212
Pays interest of 2.0% on all accounts.
Vanguard
Pays 2.60% interest on all accounts.
Frequently Asked Questions (FAQs)
Will investors pay tax on interest received?
That depends on the product in which the interest is earned. Interest earned from cash held in ISAs or SIPPs is free from income tax, whereas interest from cash held in a trading account would be subject to income tax.
How do interest rates compare to cash ISAs?
Investors are likely to receive a higher rate of interest on cash ISAs than uninvested cash held in a stocks & shares ISA.
For example, the highest interest rate offered in our pick of the best cash ISAs is currently 5.08%. This comfortably beats all of our S&S ISA providers, where the interest rate varies from 2% to 4% (for balances up to £10,000).
What are the alternatives to holding uninvested cash ?
A growing number of investment platforms offer ‘active savings’ products, which allow investors to hold cash in savings accounts on the platform. By way of example, Hargreaves Lansdown offers an easy-access savings account with Allica Bank paying a gross interest rate of 4.6%.
These allow investors to consolidate their funds in one place, as well as avoiding the paperwork required to open a savings account with a new provider.
Active savings products also enable investors to earn a higher rate of interest than leaving cash uninvested in a stocks & shares ISA. However, any funds withdrawn from a S&S ISA and re-deposited at a later date will form part of the annual ISA allowance.
Finally, it’s worth noting that equity-based investments have typically outperformed cash over the long term. According to robo-advisor Moneyfarm, the average annual return on a cash ISA over the last decade was 1%, compared to 10% for a typical stock and shares ISA.
What else should investors consider when choosing a platform?
It’s likely that fees will have more of an impact on the value of an investment portfolio than interest paid on uninvested cash. Most providers charge an annual platform fee for holding investments, together with a trading fee when buying and selling investments.
We’ve compared fees in detail, amongst other criteria, in our pick of the best trading platforms, best S&S ISA providers and best personal pension providers.
