ISA's...

[Mattus]

I notice there are also stocks and shares ISA's, I assume these carry considerably more risk?

The ISA itself doesn't have a particular 'risk level' as it's just a tax-free wrapper for investments in shares. That said, any stock market investment will carry greater risk than just leaving cash on deposit (and potentially provide higher rewards).

Shares are a medium- or long-term investment. You shouldn't really think about it unless you're willing to lock the money away for at least 5 years, and preferably 10 or more.

 

[Mattus]

They're not protected by the FSA, but Ratesetter has a fund to cover loses so you get the rate shown. The likelyhood of the fund ever failing to cover all the loses is astronomically small.

In normal circumstances yes, but there is always the chance of some systemic risk materialising which causes large numbers of borrowers to default and overwhelms the provision fund.

The chance is small, but it's there and is reflected in the interest rates. There's no such thing as a free lunch!

 

[WantoN]

With rates as they are at present, you'd be better off with some of it in something like a Santander current account.

Santander : 3% on balances up to £20,000.

If you can afford to not have access to these funds, you'll have much more competitive interest rates if you can do fixed rate ISAs for 2 to 5 years.

I've always found Halifax to be the most competitive. I currently receive 1.55% on my easy access. The best they offer now is 1.05% on a easy access, but that's still better than any other I've seen.