Making your ISA work harder for you

By Darius McDermott on 29 January 2026 in Equities, Basics

Is your Individual Savings Account (ISA) doing too much – or not working hard enough? Both can have serious repercussions for your long-term wealth.

Below, we highlight the tell-tale signs your ISA may not be on track to deliver what you expect and what you can do to ensure it better meets your financial needs.

The benefits of an ISA

ISAs are tax-efficient wrappers that enable people to save and invest for the future. Any interest or income generated is sheltered from HMRC. Under current rules, you can invest up to £20,000 each tax year into different ISA types, depending on your age and objectives. Most investors choose between Cash ISAs and Stocks & Shares ISAs, or split their annual allowance between the two.

Three reasons your ISA might not be working hard enough

1. Holding too much cash

Cash ISAs are popular, widely available products offered by banks and building societies. They play an important role in a balanced financial plan: they’re low risk and easy to access, much like a traditional savings account.

Currently, the best easy-access Cash ISAs are paying around 4.3%. That’s a reasonable return if you’re simply looking to earn some interest. However, if your money needs to grow by more than 5% a year to meet a specific goal, for example, funding a child’s education, cash alone is unlikely to be sufficient.

2. Not enough growth assets

Even within a Stocks & Shares ISA, your money may not be pulling its weight. A portfolio dominated by lower-risk assets can struggle to deliver meaningful long-term growth.

You can’t realistically expect strong, double-digit returns if most of your exposure is to dependable but slow-growing companies, or to assets such as corporate bonds. These investments play an important role in managing risk, but too much exposure can limit your portfolio’s growth potential.

3. Failing to keep pace with inflation

There’s another risk to consider: inflation.

If the interest you earn falls while inflation rises, your money’s purchasing power erodes. For example, if inflation is running at 3% but your savings are growing by only 2% a year, you are effectively going backwards in real terms.

Of course, this isn’t limited to purely cash holdings. Your overall asset mix may not be generating enough to keep pace with inflation, and that’s obviously a serious issue for long-term investors.

Two signs your ISA is trying to do too much

1. Too much exposure to risky assets

Some investors, particularly those comfortable with risk, may gravitate towards areas such as emerging markets. These under-followed regions can offer attractive upside, but they also come with higher volatility.

The danger of having too much in these areas is the increased chance of see a considerable decline – or at least enduring sleepless nights due to stock-market volatility. This can be particularly dangerous if you have a short time before a key life goal, such as retirement, because the assets will have a limited chance of recovering.

2. Over concentration

This comes down to how your portfolio is structured. Are you overly reliant on a single asset class, region or sector?

A lack of diversification can magnify losses if one area underperforms. By spreading your investments, you increase the likelihood that at least part of your portfolio benefits from strong performance elsewhere, while reducing the impact of weaker areas.

The right asset split will depend on your objectives, attitude to risk and existing holdings, but it’s something you need to consider carefully.

How to find the balance in your ISA portfolio

Ultimately, the shape of your ISA portfolio should reflect your goals, time horizon and tolerance for risk. A useful guiding principle is not to invest money you can’t afford to lose. While no one enjoys seeing their portfolio fall in value, the real question is how much volatility you can live with.

One approach is the core-satellite strategy. This involves building your portfolio around a dependable core, then adding smaller, higher-risk positions to enhance returns.

Core positions

These are suitable for investors who want to dial down portfolio risk and enjoy solid, reliable returns.

M&G Global Dividend invests in companies worldwide that can deliver stable, rising dividends. It has offered a rising income stream and excellent total returns for investors. There’s also JPM Global Equity Income. This is a core equity income fund that invests globally in large to mega-cap stocks. It also has the support of a huge team of company analysts. Our final suggestion is the Orbis Global Cautious fund. This invests in a variety of asset classes, including equities, fixed income and commodities.

Satellite positions

Now we look at the funds with a racier edge. These can add some much-needed zest to a relatively pedestrian portfolio. The Artemis US Smaller Companies fund is a high-conviction portfolio that relies on the stock-selection skills of its managers. They use multiple sources of information to generate ideas. Then there’s the WS Amati Strategic Metals fund. This is an active, high-conviction portfolio and a great diversifier that taps into investment themes, such as the transition to a lower-carbon world. You can also have single-country exposure. For example, the UTI India Dynamic Equity fund invests in a mix of large, mid and small-cap Indian companies and it’s run by an experienced team.

A final ISA check

An ISA is a powerful tool, but it isn’t a set-and-forget solution. Over time, changes in markets, interest rates and your own circumstances can mean it either stops working hard enough or takes on more risk than you intended.

Reviewing your ISA regularly, and ensuring the balance between growth and stability still reflects your goals, can make a meaningful difference to long-term outcomes. A well-constructed portfolio should support your plans, keep pace with inflation and allow you to stay invested through market ups and downs.

If you’re unsure whether your ISA is striking the right balance, taking professional advice can help ensure it remains aligned with your financial needs and continues to work as hard as possible for your future.