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Cash ISAs hit new low as Stocks & Shares ISAs grow

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Rachel Springall, Press Officer
Rachel Springall, Press Officer / Finance Expert T: 01603 476210 E: Email Rachel
21/02/2022

Cash ISAs hit new low as Stocks & Shares ISAs grow

Savers looking to utilise their ISA allowance before the 2021/2022 tax-year ends in April may well be considering a stocks and shares ISA as an alternative to a cash ISA. The latest analysis by Moneyfacts.co.uk reveals how stocks & shares ISAs have performed over the past 12 months compared to the average cash ISA rate, which has hit a record low.

 

  • The average stocks & shares ISA (individual savings account) fund returned 6.92% between February 2021 and February 2022. This year’s average performance is much more subdued than the 13.55% growth seen between March 2020 and March 2021.
  • In contrast, the Moneyfacts average cash ISA rate returned 0.51% between February 2021 and February 2022, a record low compared to the equivalent 12 months since our records began. This compares to 0.63% between March 2020 and March 2021.

Cash ISAs hit new low as Stocks & Shares ISAs grow

Savers looking to utilise their ISA allowance before the 2021/2022 tax-year ends in April may well be considering a stocks and shares ISA as an alternative to a cash ISA. The latest analysis by Moneyfacts.co.uk reveals how stocks & shares ISAs have performed over the past 12 months compared to the average cash ISA rate, which has hit a record low.

 

  • The average stocks & shares ISA (individual savings account) fund returned 6.92% between February 2021 and February 2022. This year’s average performance is much more subdued than the 13.55% growth seen between March 2020 and March 2021.
  • In contrast, the Moneyfacts average cash ISA rate returned 0.51% between February 2021 and February 2022, a record low compared to the equivalent 12 months since our records began. This compares to 0.63% between March 2020 and March 2021.

 

Average stocks & shares ISA performance

Feb 2021 to Feb 2022

% growth

Average stocks & shares ISA

6.92%

Best-performing stocks & shares ISA fund sector

27.69% (Commodities and Natural Resources)

Worst-performing stocks & shares ISA fund sector

 -21.98% China/Greater China

March 2020 to March 2021

% growth

Average stocks & shares ISA

13.55%

Best-performing stocks & shares ISA fund sector

57.3% (Technology & Telecoms)

Worst-performing stocks & shares ISA fund sector

-7.42 (Global Emerging Markets Bond - Hard Currency)

Average cash ISA rate

Feb 2021 to Feb 2022

0.51%

Mar 2020 to Mar 2021

0.63%

Average cash ISA rate is the average of each 1st of month figure over the period shown, includes fixed and variable ISA rates. All stocks and shares ISA data based on Lipper IM Primary funds.

Source: Moneyfacts.co.uk/Lipper IM

 

 

Average stocks & shares ISA performance

Feb 2021 to Feb 2022

% growth

Average stocks & shares ISA

6.92%

Best-performing stocks & shares ISA fund sector

27.69% (Commodities and Natural Resources)

Worst-performing stocks & shares ISA fund sector

 -21.98% China/Greater China

March 2020 to March 2021

% growth

Average stocks & shares ISA

13.55%

Best-performing stocks & shares ISA fund sector

57.3% (Technology & Telecoms)

Worst-performing stocks & shares ISA fund sector

-7.42 (Global Emerging Markets Bond - Hard Currency)

Average cash ISA rate

Feb 2021 to Feb 2022

0.51%

Mar 2020 to Mar 2021

0.63%

Average cash ISA rate is the average of each 1st of month figure over the period shown, includes fixed and variable ISA rates. All stocks and shares ISA data based on Lipper IM Primary funds.

Source: Moneyfacts.co.uk/Lipper IM

 

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“Savers who prefer to invest in a cash ISA will be disappointed to see the average cash ISA rate over the past year is a record low. This April will mark 23 years since ISAs were first created, and over this time there have been various tweaks and changes to adapt these tax-free savings vehicles to be more transparent and flexible for consumers. Within the past seven years, there have even been ISAs designed to help consumers save for a home or their retirement. However, the ISA market has also been devastated, particularly over the past decade when Government lending initiatives and the Personal Savings Allowance (PSA) triggered a mad dash for savings providers to reassess the interest rates they offered, including ISAs. Despite all of this, according to HMRC, most consumers invest in cash ISAs, whereas stocks & shares ISAs could perhaps be a more lucrative alternative.

“The average stocks & shares ISA fund returned a growth of 6.92% over the past 12 months, which was more subdued than the 13.55% seen between March 2020 and 2021. However, as may well be obvious, this was a volatile period, with some primary fund sectors returning a substantial growth, such as 57.3% (Technology & Telecoms). The past 12 months have been impacted by a variety of influences and this reaffirms the necessity for investors to keep an eye on their investment but not to make drastic decisions to switch without getting advice. As always, past performance is never guaranteed to be reflected in future returns, and it’s vital investors are comfortable with their level of risk.

“As inflation continues to soar and the Bank of England raises interest rates, it will be interesting to see how savers will respond and where they place their cash. It’s clear to see how cash ISAs are being eroded by rising inflation, but consumers may not feel confident enough to invest in the stock market quite yet. If consumers wish to use their 2021/22 ISA allowance or to start reviewing their plans for the next tax year with about six weeks to go, getting advice is wise regardless of whether someone is only just starting the investment path or has more experience. Those more risk-adverse savers will need to keep an eye on table-topping Cash ISA rates but consider their PSA too.”

Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:

“Savers who prefer to invest in a cash ISA will be disappointed to see the average cash ISA rate over the past year is a record low. This April will mark 23 years since ISAs were first created, and over this time there have been various tweaks and changes to adapt these tax-free savings vehicles to be more transparent and flexible for consumers. Within the past seven years, there have even been ISAs designed to help consumers save for a home or their retirement. However, the ISA market has also been devastated, particularly over the past decade when Government lending initiatives and the Personal Savings Allowance (PSA) triggered a mad dash for savings providers to reassess the interest rates they offered, including ISAs. Despite all of this, according to HMRC, most consumers invest in cash ISAs, whereas stocks & shares ISAs could perhaps be a more lucrative alternative.

“The average stocks & shares ISA fund returned a growth of 6.92% over the past 12 months, which was more subdued than the 13.55% seen between March 2020 and 2021. However, as may well be obvious, this was a volatile period, with some primary fund sectors returning a substantial growth, such as 57.3% (Technology & Telecoms). The past 12 months have been impacted by a variety of influences and this reaffirms the necessity for investors to keep an eye on their investment but not to make drastic decisions to switch without getting advice. As always, past performance is never guaranteed to be reflected in future returns, and it’s vital investors are comfortable with their level of risk.

“As inflation continues to soar and the Bank of England raises interest rates, it will be interesting to see how savers will respond and where they place their cash. It’s clear to see how cash ISAs are being eroded by rising inflation, but consumers may not feel confident enough to invest in the stock market quite yet. If consumers wish to use their 2021/22 ISA allowance or to start reviewing their plans for the next tax year with about six weeks to go, getting advice is wise regardless of whether someone is only just starting the investment path or has more experience. Those more risk-adverse savers will need to keep an eye on table-topping Cash ISA rates but consider their PSA too.”

Notes to editors

Pioneering financial comparison technology for over 30 years.

Moneyfacts Group plc is the UK’s leading provider of retail financial product data. Used by virtually every bank and building society in the UK, and supplied to the Bank of England, Financial Conduct Authority, Financial Ombudsman Service, HM Treasury, Prudential Regulatory Authority and UK Finance.

Our expert research team monitors the thousands of mortgages, savings, credit card, personal loan, business banking, life, pension and investment products in the UK.

Moneyfacts.co.uk is a financial product price comparison site, launched in 2000, which helps consumers compare thousands of financial products, including credit cards, savings, mortgages and many more. Unlike other comparison sites, Moneyfacts.co.uk shows whole of market data regardless of commercial bias, showing consumers a true picture of the best products based on the criteria they select.

We hope you find this press release insightful. We would appreciate a link back to Moneyfacts.co.uk if you decide to source this information.

For more information about us please see our key facts.

Broadcast

Our broadcast suite enables our finance experts to appear in-vision for television, and we regularly comment live on national and regional radio.

To arrange an interview for radio or television, please contact our press department. We have an in-house broadcast room.

 

Notes to editors

Pioneering financial comparison technology for over 30 years.

Moneyfacts Group plc is the UK’s leading provider of retail financial product data. Used by virtually every bank and building society in the UK, and supplied to the Bank of England, Financial Conduct Authority, Financial Ombudsman Service, HM Treasury, Prudential Regulatory Authority and UK Finance.

Our expert research team monitors the thousands of mortgages, savings, credit card, personal loan, business banking, life, pension and investment products in the UK.

Moneyfacts.co.uk is a financial product price comparison site, launched in 2000, which helps consumers compare thousands of financial products, including credit cards, savings, mortgages and many more. Unlike other comparison sites, Moneyfacts.co.uk shows whole of market data regardless of commercial bias, showing consumers a true picture of the best products based on the criteria they select.

We hope you find this press release insightful. We would appreciate a link back to Moneyfacts.co.uk if you decide to source this information.

For more information about us please see our key facts.

Broadcast

Our broadcast suite enables our finance experts to appear in-vision for television, and we regularly comment live on national and regional radio.

To arrange an interview for radio or television, please contact our press department. We have an in-house broadcast room.

 

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Rachel Springall Press Officer / Finance Expert
Eleanor Williams Press Officer / Finance Expert