Almost 1 in 5 (17%) UK adults have ‘never heard’ of a Stocks and Shares ISA and a quarter (25%) who have heard of the investment product don’t know anything about it, new research from The Investment Association and Opinium has revealed.
There is also a stark difference between those already holding investment products and the wider UK population. In comparison, just 2% of investors say they’ve ‘never heard’ of a Stocks & Shares ISA.
With less than a week to go until the end of the tax year, the research suggests that people could be missing out on tax-free ISA savings and the long-term growth investing can bring. The investment industry is also urging the government to deliver a culture of inclusive investment that empowers consumers to make informed financial decisions, including benefiting from ISA products.
Bridging the gap between cash savings and investments
Cash ISAs can be helpful for saving for immediate needs or to build a rainy-day fund. By contrast, investing through a Stocks and Shares ISA can offer stronger returns over time, helping savers grow their wealth and protecting against inflation.
Amongst the sample of Cash ISA holders, over a fifth (22%) said that they don’t know much about investing and Cash ISAs are easier to understand, and the same number said that they don’t want the value of investments to go down as well as up. However, with 2 in 5 (40%) Cash ISA holders using the product to save for retirement, many are missing out on the growth potential of investments whilst exposing their savings to the detrimental impact of inflation.
Amongst the investor sample, over half (54%) understood that investing in a Stocks and Shares ISA could give a better long-term return – over five years or more – compared to a Cash ISA. This is particularly important given that many people are saving for a long-term goal such as retirement (55%) or leaving an inheritance (19%).
Overcoming barriers to investing
Whilst the research found that uptake across all ISA products was relatively low, this is particularly true of Stocks & Shares ISAs. Less than a third (31%) of UK adults hold a Cash ISA, and even fewer (16%) currently have a Stocks & Shares ISA.
The survey also found that 62% of men are investors compared to women, whereas the split between men and women who hold Cash ISAs is much more even. Men are also twice as likely to have a Stocks and Shares ISA compared to women (21% vs 11%)
Amongst Cash ISA savers who don’t currently hold any investment products, almost two-fifths (39%) said no amount of savings would make them feel comfortable investing. This is significantly higher amongst older generations – over half (53%) of Baby Boomers compared to 23% of Gen Z and Millennial Cash ISA savers. However, this means that 61% could become comfortable with the idea of investing – presenting a significant opportunity to grow their savings and build financial resilience for the future.
For comparison, if you had invested £10,000 into a Cash ISA 5 years ago, it would be worth £8,713 in today’s money due to the eroding impact of inflation. If this same amount had been invested in a typical global equity fund via a Stocks & Shares ISA, it would be worth £12,249 today.[1]
Miranda Seath, Director of Market Insights at the Investment Association, commented:
“ISAs are an important, tax-efficient tool to help people to achieve their financial milestones, whether that’s buying a first home, preparing for retirement, or simply securing their financial future. For many, they are also an important first step towards getting started with investing.
“Our research has highlighted a significant knowledge gap between those who are already investing and those who are yet to get started. This means that people across the UK are missing out on the benefits and growth potential investing can bring – and that needs to change.
“The investment management industry has pledged to increase the number of people holding an investment product from just over 20% of the UK population to 75% over the next decade – matching the number who hold a cash savings account today. In turn, this could take advantage of the investor sentiment to back Britain. It is not only the economy that will benefit, but the millions of people across the UK that will reap the rewards investing can bring to their long-term financial security.”
