Analysis from St. James’s Place, based on HMRC’s latest savings figures, shows cash ISA subscriptions rose 26% in 2023/24, while stocks and shares ISAs grew just 7%. Savers sticking to cash could miss out: a decade of full ISA investments in global equities could have added £146,900 more than a cash ISA.
As HMRC’s latest annual savings figures (released today) highlight an 26% increase in the number of people subscribing to cash ISAs from 7.86m in 2022/23 to 9.94 in 2023/24, but a much smaller increase (7%) in the popularity of stocks and shares ISAs, with only 283,000 new accounts opened, new analysis from St. James’s Place (SJP), highlights the long-term financial trade-off savers may be making by leaving their money in cash.
For example, someone who invested the maximum ISA allowance annually into a stocks and shares ISA tracking the MSCI World Index since 2015/16 (a total of £190,500) could have built up a total pot of £364,2002, benefitting from returns of £173,700 over the period. By contrast, placing the same contributions into a cash ISA tracking the Bank of England base rate would have grown to £217,300 – almost £147,000 less.
SJP’s analysis also illustrates the benefit of investing when it comes to beating inflation. Just to keep pace with inflation over the period, the value of the ISA at the end of ten years would need to have grown to nearly £236,400 – over £19,000 more than the cash ISA achieved, yet nearly £128,000 less than the stocks and shares ISA delivered.
| Total Investment (based on £15,240 maximum annual contribution in 2015/16 and 2016/17 and £20,000 maximum contribution from 2017/18 onwards) | Final Value of Investment2 | |
| Stocks and shares ISA (MSCI World Index) | Cash ISA (Bank of England base rate) | |
| £190,500 | £364,200 | £217,300 |
| Return on investment | +£173,700 | +£26,800 |
Claire Trott, head of advice at St. James’s Place, comments: “Today’s HMRC figures are the latest indication that the UK population is over-saved and under-invested. While a cash buffer is important – and no doubt brings comfort to savers, promising safe, guaranteed returns – individuals who chose a cash ISA over a stocks and shares ISA could be missing out on hundreds of thousands of pounds over the long term.
“For individuals saving for long-term goals the cash ISA approach can be risky. As shown by our analysis, inflation can quickly and substantially erode the real value of cash savings. Ultimately, those wanting to reap the rewards of their finances over the long term need to be invested in the market. While short term fluctuations and market volatility may deter risk averse savers, history shows that staying invested over time has consistently offered far greater potential for growth, and protected wealth against inflation. For those nervous about investing without guidance, speaking to a financial adviser can be a great way to get started, and can provide confidence you’re making the best decisions over the long term.”
