ISAs are a great way to make tax-free returns on your money. While there are several types available, the two most popular are Cash ISAs and Stocks and Shares ISAs. Both have their advantages, but research shows that without the right balance between them, many people miss out on the long-term growth that Stocks and Shares ISAs can offer.
This is especially relevant in the UK, where saving is often favoured over investing. A government report found that the UK has the lowest level of retail investing among the G7, and around 29 million people have savings accounts that earn roughly 1% interest.
And the saving trend is continuing. Research by Paragon shows that as of May 2025, £417 billion is sitting in Cash ISAs, up from £378.7 billion in January.
The Autumn Budget 2025 reduced the annual Cash ISA allowance. While Cash ISAs still offer tax-free interest and short-term security, the lower limit means savers may now need to think more carefully about how much they hold in cash versus investing for long-term growth.
While there are benefits to cash savings, such as guaranteed interest and security, many savers may be overly cautious and miss out on the potentially higher returns of a Stocks and Shares ISA.
An independent financial planner can help you balance your Cash ISA savings and your Stocks and Shares ISA investments to ensure a level of security while opening you up to growth.
Read on to find out why you shouldn’t neglect Stocks and Shares ISAs and what role Cash ISAs can play in your wider plan.
If you had placed £10,000 into a Cash ISA in 1999, your balance today would stand at just over £19,000. But if you had invested in the FTSE All-World Index, your money would now be worth more than £75,000.
Stocks and shares have delivered stronger returns than cash savings over time
When looking at the difference between cash and market returns, periods of a year may present a mixed picture, as the market may have fluctuated over those months. However, when you zoom out and look at longer timeframes, the difference in returns is clear.
Research published by IFA shows just how big the long-term gap between saving and investing can be.
They found that if you had maxed out your Cash ISA allowance every year since they were introduced in 1999, your money would have grown at an average annual rate of 2.85%. But if you’d invested the same amounts into FTSE 100 companies, your average annual return would have been 4.4%.
Over those 26 years, you would have contributed a total of £252,460, and the difference really adds up. Not accounting for inflation, a Cash ISA would have a final balance of £524,692, while investments would have reached £773,362. Once you account for inflation, the total real return for Cash ISAs would have been 9.2% compared with 62.4% for investments.
Of course, this requires your money to have been invested wisely, which is where an independent financial planner comes in. They can help you build a balanced, long-term investment strategy that aligns with your goals, your risk tolerance, and the level of volatility you’re comfortable with.
Stocks and Shares ISAs are more likely to keep pace with inflation
Cash ISAs are also less likely than their Stocks and Shares counterparts to keep pace with inflation over the long term. So, while they offer guaranteed interest, the real value of your savings can still fall, meaning the security they provide may not hold up over time.
Research from This is Money shows the stark difference between Cash ISAs and Stocks and Shares ISAs in terms of inflation.
They found that if you had placed £10,000 into a Cash ISA in 1999, your balance today would stand at just over £19,000. But if you had invested that same £10,000 in the FTSE All-World Index, your money would now be worth more than £75,000.
Once you account for inflation, the contrast becomes even sharper. The real spending power of your £10,000 Cash ISA savings would have fallen to under £5,000, while your investment would still be worth almost £65,000.
As you can see, inflation erodes value over time, and Stocks and Shares ISAs typically offer a far better chance of keeping pace.
A financial planner can create a balanced plan based on your lifestyle, goals, and risk profile
It’s important to restate that Cash ISAs can still play an important role in your financial plan, but the key is finding the right balance.
Cash savings are ideal for an emergency fund or for covering short-term goals you expect to pay for soon. Beyond that, they risk losing value in real terms and missing out on the stronger long-term returns that investing can provide.
The right balance between Cash ISAs and Stocks and Shares ISAs depends on your personal risk profile and your capacity for loss.
An independent financial planner can assess how much risk you’re comfortable taking, and how much you can afford to take without compromising your financial security. This ensures your portfolio isn’t just aiming for growth and is aligned with what is right for your circumstances.
Get in touch
An Amber River financial planner can help you build a balanced portfolio that supports both your short- and long-term needs. They’ll take the time to understand your goals, lifestyle, and risk profile, and then advise you on how much you may want to hold in cash and how much to invest.
This can give you greater confidence that your money is working to both protect you today while helping you grow your wealth for the future.
To set up an initial appointment with an Amber River financial planner, call 0800 915 0000. Alternatively, you can use our contact form to arrange an appointment.
Disclaimer
The information within this article was correct at the time of publishing, but laws and tax rules are subject to change. Your circumstances and where you live in the UK may also have an impact on your tax treatment.
