1 surging FTSE 100 bank to consider putting into a £20k Stocks and Shares ISA

What are schools teaching them? The kids, I mean. Around 8m Brits have their savings in simple Cash ISAs, while only 3m have a Stocks and Shares ISA account.

Perhaps the trend is reversing? No! The number of Cash ISAs increased by 700,000 on the latest yearly figures yet the number of Stocks and Shares ISAs decreased by 100,000. One in five members of the British public haven’t even heard of the latter type of account!

This disparity comes despite a very pronounced difference between the typical return rates of both types of investments in recent decades. Spoiler alert: the stock market wins handily.

Our esteemed Chancellor of the Exchequer Rachel Reeves agrees. She’s racking her brains to come up with a way to get the population putting their money behind the stock market, evidenced by rumours that she’s threatening to slash the deposit limit on Cash ISAs to £4,000 a year.

Best in the world?

Even many Brits who consider themselves au fait with the Stocks and Shares ISA are likely in the dark about just how powerful they are. The Telegraph went so far as to call them “probably the best investment wrapper in the world”. A pretty bold claim, no? What’s so good about this type of ISA to place them at numero uno on the global stock investing leaderboard?

For one, deposit limits are high. A £20,000 a year (or £1,667 a month) contribution limit covers pretty much everyone. For two, the tax shielding is sublime. Dividend taxes and capital gains taxes paid through this account are a big fat zero – and that’s for life, too!

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

For three, given London’s world-class financial sector, I have access to tonnes of fintechs offering easy-to-use apps with super-low fees that let me invest in almost any stock I want – including across the pond, which has offered some incredible returns in recent years.

One idea

Speaking of our country’s rather large finance sector, I can invest in one of those many companies in such an ISA. For example, shares in high street bank NatWest (LSE: NWG) have been surging lately, up 41% in the last year.

Why? Well, on 30 May, the government sold the last of its bailout stake from 17 years ago. Then on 25 July, NatWest posted a terrific set of earnings. Earnings beat expectations for the quarter. Guidance for next year was upgraded. A £750m pool of cash was earmarked for share buybacks too. All three bode well for the share price going forward.

Looking to the long term, CEO Paul Thwaite, speaking excitedly of “revolutionising how we operate” through “AI capabilities”, highlights how this isn’t a stuffy old defensive stock but one prepared to meet the future.

As for downsides, rumours of falling interest rates will hurt all lenders who profit from the margins between borrowing and lending. NatWest shares may also struggle if UK economic forecasts continue to be missed, given its reliance on the domestic market. Overall though, I think this is one investors may wish to consider for an ISA.

The post 1 surging FTSE 100 bank to consider putting into a £20k Stocks and Shares ISA appeared first on The Motley Fool UK.

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John Fieldsend has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.