As the new tax year begins, savvy investors are contemplating the best funds for their Individual Savings Accounts (ISAs). With the allowance now set at £20,000 per person, this is an opportune moment to explore investments that can potentially outperform traditional cash savings. Experts believe that embracing stocks and shares ISAs can yield superior returns compared to cash ISAs, especially given the current economic climate marked by elevated inflation and fluctuating markets.
Stocks and Shares vs. Cash: The Case for Investment
The stock market has been experiencing significant volatility, leaving many investors cautious. However, those willing to take a long-term view are likely to find that stocks and shares ISAs outperform cash savings. According to Dan Moczulski, managing director at eToro UK, the average stocks and shares ISA has increased in value by approximately 11 per cent over the past year, contrasting sharply with the meagre 3.48 per cent return typical of cash ISAs. With UK inflation hovering around 3 per cent, keeping funds in cash could erode purchasing power, making investment in the stock market an increasingly attractive option.
Expert Picks for 2026
With the new tax year in full swing, we consulted several financial experts to identify their top fund choices for ISAs. Here’s what they recommend:
Scottish Mortgage FTSE 100
Annabel Brodie-Smith, communications director at the Association of Investment Companies (AIC), highlights the Scottish Mortgage FTSE 100 investment trust managed by Baillie Gifford. This fund focuses on high-growth private and public companies, including notable names like SpaceX and Meta. Trading at a 5 per cent discount and with low fees of just 0.31 per cent, it’s designed for investors with a high risk tolerance. The trust has seen impressive gains, climbing 27 per cent in the past year and 68 per cent over five years.
iShares Over 15 Years Gilts Index Fund (UK)
Alan Miller, chief investment officer at SCM Direct, champions the iShares Over 15 Years Gilts Index Fund, which tracks UK government bonds with maturities extending beyond 15 years. With net assets of £2.95 billion and an ongoing charge of only 0.1 per cent, this fund presents a compelling value proposition. Miller points out that locking in a yield to maturity close to 5 per cent is historically exceptional, especially as gilts reach multi-decade highs. While the fund has been relatively flat over the past year, it is anticipated to perform better as interest rates rise.
Man Income Fund
Paul Agnell from AJ Bell advocates for the Man Income fund, known for its strategic approach in investing in undervalued UK companies that offer yields comparable to market rates. Agnell notes the fund’s success in the early months of 2026, achieving over a 10 per cent increase and a dramatic 28 per cent rise in the previous year. The fund targets undervalued stocks with solid cash flow, making it a reliable choice for income-focused investors. Charges stand at 0.9 per cent.
Murray International
Philippa Maffioli from Blyth-Richmond Investment Managers endorses Murray International for its balanced approach to global diversification and steady income. Yielding around 3.5 per cent, the fund seeks sustainable income without overemphasising high yields. With ongoing fees of 0.5 per cent, it has gained 36 per cent in the past year and 60 per cent over five years, making it an attractive option for those looking to reinvest dividends for compounding growth.
Pantheon Infrastructure Plc
For those seeking diversification from stock market volatility, Jonathan Moyes of Wealth Club recommends Pantheon Infrastructure Plc. This fund co-invests alongside prominent infrastructure managers in key sectors, including renewable energy and data centres. Trading at a 13 per cent discount to its net asset value, Moyes highlights its potential for significant gains as the discount narrows. However, investors should be cautious, as this is classified as a high-risk investment with ongoing charges of 1.29 per cent.
Considerations for Investors
As you explore your ISA options, remember to evaluate any potential share dealing costs associated with your investment platform. These costs can erode long-term returns, making it essential to choose a platform that minimises fees.
Investing always carries an element of risk, and there’s the possibility of receiving less than you initially invested. However, with the right strategy and a diversified portfolio, the potential rewards can be substantial.
Why it Matters
In an environment characterised by rising inflation and fluctuating interest rates, the choice of where to invest your ISA allowance becomes increasingly critical. Funds that provide diversification, steady returns, and exposure to growth sectors can safeguard against economic uncertainties. As the 2026 tax year unfolds, these expert recommendations can guide investors toward making informed decisions, potentially boosting their financial futures.