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.”