The passion for cash in their ISAs has left UK households more than £ 500 billion worse off than if they’ d invested in the stock market in the 10 tax years to April 2023. This is based on what those savings would be worth in the present day( as at 30.04.25).
Think what a difference that could have made, to individuals and the UK economy. It’ s equivalent to nearly 20 % of UK GDP.
UK households have missed out on more than £ 500 billion by putting money in cash ISAs instead of stocks and shares
Past performance is not a guide to the future and may not be repeated.
ISA subscriptions are assumed to have been invested at the average market level in each tax year and / or to have earned the average cash ISA rate / Bank of England( BoE) bank rate in each tax year. Global equities are MSCI World index, total returns terms in GBP. Source: Cash ISA subscription amounts from HMRC, ISA rates and bank rate from BoE, MSCI World returns from LSEG Datastream. Data to 30.04.25.
As an investment industry, we talk about risk a lot. But we frequently fail to explain in plain English what this means, nor that it means different things to different people. And that without risk, clients will be unable to achieve their financial goals.
Let’ s get this out of the way first
Cash certainly has a role to play. It can be the most suitable place to put your money when your time horizon is short and / or absolute certainty is the top priority.
More generally, when it comes to building financial resilience, a rainy-day cash fund should be a priority. Research has shown that that having a £ 1,000 buffer cuts your chances of falling into debt by almost a half. Sadly, 24 % of UK adults have less than this.
But what is worth challenging is the cultural inertia which leads people to stay mostly or entirely in cash once they have larger amounts of savings or a longer-term horizon.
Few advocates for investing
“ The value of your investments may go down as well as up and you may not get back what you originally invested.” This is what individuals see when they investigate opening a stocks and shares ISA. The emphasis is on the downside. For the wary, it can only add to their worries.
Is it any wonder we don’ t have an investing culture in the UK? Every message that ordinary savers receive focuses on the risk of losing money. We are obsessed with risk disclaimers and risk avoidance. There is no personal accountability. People think it is the regulator’ s job to stop them from losing money, a view shared by many politicians. There are few loud enough voices shouting in opposition: we have got this all wrong.
Reframing risk
The real risk for most people is not the risk of losing money in the short run but the risk of not achieving your long-run goals, be they a comfortable retirement, house purchase, providing financial support to your children, or simply making sure your savings keep pace with inflation.
This is the risk of not taking enough risk.
The problem with cash
Cash is not risk free. £ 10,000 under the mattress 10 years ago will still be £ 10,000 today. The problem is that, because of inflation, you won’ t be able to buy as much with that anymore. £ 10,000 worth of goods and services at the end of 2014 would have cost you around £ 13,500 at the end of 2024 1.
60 | The Adviser