Cash ISA Risks
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When considering the risks associated with investing in a Cash ISA there are three types of risk one should consider;
Inflationary Risk
Essentially this is the risk that the rate of inflation will undermine the value of any interest that you receive.
For example if the cost of living is rising each year by 5% (inflation) and your cash ISA is paying an interest rate of 4% then you are in fact losing money in real terms.
Fiduciary Risk
In the context of cash ISAs fiduciary risk refers to the possibility that the company with whom you are saving is poorly run and goes bust losing you your money.
In the UK we have a very good compensation scheme known as the Financial Services compensation Scheme and it covers each saver for £85,000 worth of loss per institution so if your combined savings are below this amount you should be covered, once you approach this number however you might consider spreading your savings around unrelated banks and building societies to spread you fiduciary risk.
Regulatory Risk
Simply put this is the risk that the financial services regulator or government will change the rules that relate to your account, or the compensation system that protects it.
There is very little that a private individual can do to counter this risk other than think carefully about who you vote for!