UK cash versus investing since 2010: stocks beat cash ISAs by wide margin as government nudges savers toward investing

From 2010 through 2025, a long-running comparison of cash versus investing in tax-advantaged accounts shows that stocks and shares ISAs dramatically outperformed cash ISAs, even as markets weathered Brexit, a global pandemic, and periods of volatility. Moneyfacts Compare’s analysis indicates that a £100 cash ISA would have grown to about £130 over the period, while the same £100 placed in a typical stocks and shares ISA would have risen to roughly £233. The contrast comes as inflation averaged about 2.92% in that span, highlighting a real-terms advantage for invested savers. The takeaway is clear: over the long term, investing through a diversified stocks and shares ISA provided far stronger growth than keeping money in cash.

The magnitude of the gap is tied to the performance of a diversified basket of funds tracked by London Stock Exchange Group’s Lipper data, including exposure to property, emerging markets, UK Gilts, Japan, and European smaller companies. The average cash ISA returned about 1.79% annually, while the stocks and shares counterpart delivered a significantly higher, long-run average of about 6.79% before costs, readily outpacing inflation and compounding over 15 years. The analysis underscores that staying invested through periods of turbulence—Brexit, the pandemic, and the current cost-of-living pressures—can pay off for those who ride out short-term swings.

The data come amid a broader government push toward investing. In the Budget, Chancellor of the Exchequer said the cash ISA limit would be cut to £12,000 for savers under 65 beginning in 2027, part of an effort to nudge households toward growth assets. The aim, officials say, is to strike a balance between preserving money and encouraging savers to deploy funds in vehicles with higher long-term growth potential. The policy shift has sparked debate about risk tolerance and financial education, with advocates arguing that more work is needed to change the mindset of risk-averse savers while preserving access to stable, shorter-term cash buffers.

Caitlyn Eastell, director of Moneyfacts Compare, summarized the conclusion for ordinary savers: investing through a stocks and shares ISA generally outperforms keeping money in cash, even after a century of market ups and downs. “When it comes to building long-term wealth, investing through a stocks and shares ISA outperforms saving in cash,” she said. “This gap is despite the stock market’s turbulence over the last 15 years, which was caused by Brexit, a global pandemic and the cost-of-living crisis. It proves that staying invested, despite periods of volatility, pays off.”

The broader saver landscape remains nuanced. This year has seen a strong push toward growth in many policy circles, but cash ISAs still serve a purpose, especially for shorter-term goals centered on capital preservation. Eastell noted that cash ISAs can be a suitable option for emergency funds, but the data show a growing proportion of savers opting for the potential higher returns of equities over the longer term.

The push to nudge savers toward investing sits alongside evidence of how households allocate money in the near term. In the first six months of the year, savers poured about £42.5 billion into tax-free accounts, according to analysis from Janus Henderson Investment Trusts. That period saw roughly 44 pence in every pound saved being placed into cash ISAs, a reflection of the 44% share of the estimated £96 billion saved by British households during that interval. The figures illustrate a developing pattern: while cash savings remain important for liquidity and short-term goals, a sizable segment of savers appears to be slowly shifting toward vehicles with longer-run growth potential.

Financial watchdogs are poised to support this transition with new guidance. From April next year, banks and other financial firms will be allowed to offer targeted support to customers through generic recommendations based on their financial circumstances. The aim is to give people nudges toward better options when they hold excessive cash relative to their goals, including suggestions to consider investing for potentially higher returns if appropriate.

Policy makers also point to the size of the cash-holding cohort. FCA data indicate that roughly seven million people hold more than £10,000 in cash savings, a level that could yield meaningful improvements if directed toward investments with higher expected returns over time. The guidance will enable firms to provide information and recommendations commonly observed among peers, while preserving consumer choice and investment risk controls.

For savers navigating the current landscape, the choice between cash and investing remains far from simple. The long-run pattern—stocks and shares ISAs outpacing cash ISAs by a wide margin—supports the case for a diversified, long-term investment strategy for many households. Yet experts also emphasize that individual risk tolerance, time horizon, and liquidity needs should shape decisions. In an environment of policy changes and evolving guidance, savers may benefit from starting with clear goals, assessing time horizons, and seeking impartial financial advice to tailor a mix of cash reserves and investment vehicles that aligns with personal circumstances.