Research reveals Brits who invested £10,000 in stocks & shares in 2016 are £5,110 better off today than their counterparts who stashed their savings away in Cash ISAs.
Analysis of Bank of England and FTSE100 data by investment platform Lightyear finds that British retail investors with £10,000 in Cash ISAs since 2016 have seen £1,248 in returns over the same period.
Cash ISAs have delivered, on average, 12% returns since 2016, compared to a staggering average of 64% from those who invested in the FTSE100 through a stocks and shares ISA.
This means retail investors could be more than five times better off than savers, and those who choose not to invest in the stock market could be missing out on significant returns.
According to the data, investment in the FTSE100, which retail investors can do through a Stocks and Shares ISA, has outperformed Cash ISAs in returns for six out of the nine years between 2016 and 2024. Cash ISA values have crept up slowly over the years, with the highest returns for investors in 2023 (2.8%) and 2024 (3.6%), and a low of 0.36% in 2020.
Investment in the FTSE100, by contrast, has seen greater fluctuations as expected, peaking at 28.2% in 2019 and again at 22.7% in 2024, with lows of -16% in 2020.
This comes with widespread speculation that the UK Chancellor may reduce the annual Cash ISA contribution limit, to encourage retail investors to build wealth through stocks & shares investments. The research suggests Cash ISAs remain a valuable tool for security against macroeconomic shocks, but stocks & shares deliver consistently higher returns.
Earlier this year, Lightyear re-launched in the UK to offer investors a flexible Stocks & Shares ISA, which allows users to withdraw money and pay it back within the same allowance period. The investment platform is calling on the UK Government to explore single tax wrappers for Stocks & Shares and Cash ISAs.
Wander Rutgers, UK CEO of Lightyear, said: “The UK needs to come out of its savings shell to reap the rewards of investing. Cash still has a place, but in recent weeks, banks like Nationwide have slashed interest rates on savings accounts and Cash ISAs. Even major high-street banks such as Lloyds and Barclays are now only offering up to 4% interest, and that’s just on fixed-term ISA products. Easy access rates are pitifully low.
“Our research shows that since 2016, the stock market outperformed cash across the nine-year period to 2024, leaving customers who invest their money with five times better returns. To build meaningful long-term wealth, investing in stocks and shares needs to become the rule, not the exception. It should sit alongside cash savings, under a single ISA wrapper, to help people get the most from their money.”
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