ISA season is here!

The 2024/25 tax year is now upon us and many of you are starting to review where to invest your hard-earned cash to make the most of the tax-free allowances available to you!

In March, we launched a brand new Sustainable ISA, which means for the first time ever Sheffield Mutual are able to offer two different ISAs. Dawn Webb, our Chief Commercial Officer, takes us through an overview of both products.

Two great ISAs, two levels of risk, two different funds
- same exceptional service

Sheffield Mutual’s Investment ISA has become one of our most popular products since its launch back in 2005. We now have thousands of members with one or more Investment ISAs held with us. The opportunities to limit the amount of tax you pay are few and far between, so ISAs are often a very attractive savings vehicle. Our medium to low risk with-profits Investment ISA has provided consistent returns throughout its lifetime and has become a firm favourite for those looking for better potential growth than could be achieved with a cash ISA over the medium to longer term, without exposing their money to higher risk investments. The fund also aims not to invest knowingly or directly in industries relating to armaments, tobacco, gambling and pornography.

2023 saw hikes with the Bank of England base rate and therefore the rates available for cash ISAs increased over the year. We are now starting to see these rates tail off, with mortgage providers also reducing their rates back in January. Our Investment ISA is linked to the performance of our with-profits fund, it’s not tied to the base rate. As you can see from our performance page, our fund performed well in 2023, which has enabled us to retain and announce our very competitive bonus rates. Alongside this in 2023 we reduced the charges on the Investment ISA from 1.50% to 1.25%, which further increases its appeal.

The other thing to remember about the Investment ISA is smoothing. This is the process where we hold back some surplus profit in good years so we can top up policy bonuses in years where the performance is not as positive. Smoothing aims to even out the short term ups and downs that are often associated when investing directly in the stock market and has enabled us to maintain stable bonus rates even in volatile markets.

Risks you should be aware of: The payment of policy bonuses is not guaranteed and depends on the performance of the with-profits fund. In certain circumstances your capital is at risk. Tax treatment depends on individual circumstances and may be subject to change in the future.

Feedback we have received from some of our members indicated that there was an interest in higher risk ISA investments, with this in mind the team has been hard at work developing our unit-linked Sustainable ISA. If you’re interested, please read on to find out more!

Savings with a sustainable focus in mind

About the fund
We wanted to offer members something completely different to our current suite of with-profits policies and with our Sustainable ISA, we believe we have certainly achieved that. The fund went live in October 2023 and we launched the Sustainable ISA on 1st March 2024.

Our sustainable fund lets you invest in a highly diversified investment, with strong Environmental, Social and Governance (ESG) characteristics. It spreads the risk across different asset classes, such as equities, bonds and cash. If one investment performs poorly, then you still have the others to fall back on. Active management within the fund generates additional returns through individual manager selection and adjusting the asset mix to suit market conditions. As different asset classes perform well at different points in time, investing in a range of asset classes can help limit the degree to which the value of your investment fluctuates. However, please be aware that even a well diversified fund can fall in value, and you may get back less than you invest.

Sheffield Mutual’s Sustainable ISA is a medium to high-risk product. Your money will be invested in a fund of funds (multiple individual funds within one overall fund), this means that Sheffield Mutual can adopt various approaches to investment and sustainability outcomes. Having a more diversified strategy is likely to achieve consistent returns. Sheffield Mutual’s Sustainable Fund contains approximately 15 individual building blocks, all with a slightly different focus. The Sustainable Fund is net zero aligned and signed up to follow the Principles for Responsible Investment (PRI).

How does our unit-linked fund work?
Any money you pay in is invested in our Sheffield Mutual Sustainable Portfolio Fund (SMSPF) then, working with our investment managers, we manage the fund for you so it’s nice and simple. All you need to do is contribute to your policy, then leave the rest to us.

As the policy is unit-linked, any money you add is used to buy units in the SMSPF, the number of units you’ll receive will be dependent on the unit price of the week when you open the policy/make a top up. For example, if you invested £250 and the unit price was £100 you would be allocated 2.5 units. The unit price will then change each week and the value of your investments will go up or down, depending on the performance of the overall fund.

When you pay in money, or make a withdrawal from your policy, we will normally work out the number of units we add or withdraw by using the next available prices after receiving your instructions (this could take up to 10 working days). We do this as it helps to protect all policyholders invested in the fund, this means that no one can take advantage of changes in the stock markets that are reflected in the most recent fund prices. Another feature of this plan is that on death, we will not just payout the value of the fund at the date of death, but we’ll also add an additional 1%.

The fund has a management charge of 1.17%, the unit price you’ll see, already has the charges deducted.

What else do I need to know?

• You can start saving from just £10 per month or £100 lump sum up to £20,000 in the current tax year
• We accept transfers from an existing ISA of up to £150,000 and we’ll manage the transfer for you
• You can access your money if you need it (subject to £500 minimum withdrawal)
• Stop, start, top up or vary your payments at any time
• You could see more growth than a cash ISA over the longer term

Please read the full product literature before applying.

Risks you should be aware of: Our Sustainable ISA is a medium to high-risk investment fund, which means the value of your investments may go up or down and you could get back less than you invested. Tax treatment depends on individual circumstances and may be subject to change in the future.

I’ve created below a simple quick reference table to help you spot the similarities/differences of both products but if you have any further questions or would like further information, you can call us on 01226 741 000 Monday – Friday, 9am to 5pm and one of our trained team will be able to assist. We also offer the Investment Junior ISA, so if you are interested investing for a child, please also ask us about that.

* It can take up to 10 working days for any transactions to be processed 

This article provides generic information and opinions of the writer and should not be relied upon for making investment decisions. No financial advice has been provided by Sheffield Mutual. If you are in any doubt as to whether a savings or investment plan is suitable for you, you should consider contacting a financial adviser for advice which may incur a fee.