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Saving small – is it worth saving a modest amount in an ISA?

Thu 28 Oct 2021

ISAs are a tax-efficient way to save. During the current 2020/21 tax year, individuals can invest up to £20,000 into an ISA, which is normally free of all tax (the value of tax benefits depends on your individual circumstances and tax rates or legislation which could change in the future).


It’s easy to be intimidated by the headline £20k. So what if you don’t have £20k to put away? Is it still worth opening an ISA?

Research from HMRC[1] shows that nearly half of ISA investors (44%) save between £1 and £2,500 per annum into their ISA. It doesn’t matter how much you put in, the amount will still normally be tax free. This means that whenever you decide to access that money it will not be taxed.


It is helpful to just get into the mindset of saving, particularly if you know you can change or stop your monthly savings amount if you need to. Many people find it helpful to allocate a modest amount to savings via a regular direct debit or standing order so make sure they are saving before seeing it as money to spend.


There are a number of different types of ISA. The main two are a cash ISA and a Stocks and Shares ISA. A cash ISA is essentially the same as a savings account, except there are limits on the amount you can deposit each tax year and ISAs are more tax efficient. A Stocks & Shares ISA can invest your contributions into a range of different investment including shares, funds, investment trusts, bonds, cash. The performance of a Stocks and Shares ISA is determined by the performance of the underlying assets in the ISA, which may go up or down.


The Police Mutual ISA is a Stocks and Shares ISA, so the value of any investment you make may go up or down in value and you may get back less than you invested.


With the Police Mutual ISA you can save from just £30 per month. You can also stop, change and restart payments as your circumstances change. So you can start investing into the Police Mutual ISA knowing that if you need to you can stop making payments or reduce the amount you are putting away each month (subject to minimum premiums). Conversely if you feel you can afford more for a few months then you can up your monthly payments, or top it up with additional lump sum payments (subject to minimum lump sum premiums). 


But is £30 per month really worth investing?

£30 per month equates to £360 per year, which over the medium term equates to £1,800 that you have contributed into your ISA in 5 years. So suddenly £30 per month doesn’t sound so small. If you take advantage of the ability to make additional lump sum contributions into your ISA, and make say 2 lump sum payments each year, each of £100, then over 5 years you will have contributed £2,800 into your ISA. But you do need to remember that with a Stocks and Shares ISA you may not get back the amount you invested.


Very often the act of setting up a small regular savings plan is the trigger to get you into the routine of saving. So don’t be put off by thinking that you can’t afford to save the “necessary” amount to make it worthwhile. All savings is worthwhile as it helps you build a pot for your needs and future aspirations.


Things to think about

  • The Police Mutual ISA is a Stocks and Shares ISA.
  • The money you pay in is spread across a range of investments.
  • The value of your investment can go down as well as up so when you take your money out you may get back less than you put in.
  • Police Mutual ISA is designed to be a medium to long-term investment, held for 5 to 10 years or longer.
  • In the tax year 2021/22 the maximum you can save in ISAs is £20,000. You can only pay into one Stocks and Shares ISA each tax year.
  • Assuming you save for at least 5 years, we have classified the product as 3 out of 7, which is a medium to low risk investment. This rates the potential losses from future performance at a medium to low level, and poor market conditions are unlikely to impact our ability to pay you. The risk may be higher if you hold the product for less than 5 years. The risk indicator allows you to compare the level of risk of this product against other similar products.


Get started

To find out more about investing in the Police Mutual ISA see here:  Police Mutual ISA | Police Mutual

Or watch our new video that tells you how to invest in the Police Mutual ISA: How to invest in the Police Mutual Stocks & Shares ISA | Police Mutual

Police Mutual is a trading style of The Royal London Mutual Insurance Society Limited. The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL. For your security, all calls are recorded and may be monitored.


[1] Commentary for Annual savings statistics: June 2021 - GOV.UK (


Type of article: Articles
Category: Saving my money

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