Cash ISA vs stocks and shares ISA: which is better for your money?
The debate over low-risk cash ISAs versus higher-returning stocks and shares ISAs overlooks the fact that both have an important role for different goals
By Laura Miller
Contributions from
Dan McEvoy
Deciding whether to put your money into a cash ISA or a stocks and shares ISA has always been a head-scratcher.
However new data points to a huge gap in potential gains possible, with a significant gulf between the biggest cash ISAs and stocks and shares ISAs.
The 25 highest-value ISAs in the UK now hold a combined £274.4m, up by more than £50m in just one year, making each of their owners a multi-millionaire, according to figures obtained by investment platform InvestEngine through a Freedom of Information (FOI) request to HMRC.Article continues below
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On average, each of these accounts is worth almost £11 million, and they are all stocks and shares ISAs. In comparison, the 25 highest value cash ISAs have a combined value of £16 million, meaning each is worth on average £10.3 million less at £640,000.
The FOI data also shows that the number of ISA millionaires in the UK has now reached 5,070. This is up by 220 in the past year and nearly ten times higher than the 570 recorded in 2016, according to HMRC. As the 25 highest value cash ISAs have an average value of just £600,000, most ISA millionaires will have reached this level of wealth through stocks and shares.
The difference between saving and investing is further highlighted by the fact that an individual who had maxed out their cash ISA allowance every year since ISAs were launched in 1999, earning interest in line with the average interest rate banks lend money to each other, would have accumulated £418,176 by February 2026.
In contrast, someone who invested their full allowance each year in a stocks and shares ISA – such as an exchange-traded fund (ETF) tracking global stock markets – would now be an ISA millionaire, with £1,357,964 in their account, more than three times higher than the equivalent in a cash ISA.
How can ISA investments make you an ISA millionaire?
As the figures show, investing is one of the most effective ways to grow long-term wealth, but factors like fees can still make a significant difference to the final gains. Two people investing £1,000 each month over 20 years, achieving the same real returns of 5% per year, could end up with a difference of more than £43,000 in today’s money purely because one paid 1% in annual fees while the other paid none, by InvestEngine’s calculations.
Andrew Prosser, head of investments at InvestEngine, said: “The proof is in the pudding: those who have consistently invested their full ISA allowance in stocks and shares since 1999 are now over three times better off than savers who have done the same using cash ISAs.
“This long-term outperformance is already translating into real-world outcomes, with the number of ISA millionaires continuing to climb and reinforcing how investing early and consistently in a diversified portfolio can make a meaningful difference to long-term, tax-free wealth as part of a broader financial plan.
“With the government increasingly encouraging people to invest rather than rely on cash for long-term saving, the widening gap between investors and cash savers is becoming hard to ignore.”
Government ISA reforms
Following ISA reforms at the 2025 Autumn Budget, the differences between cash and stocks and shares ISAs have been thrust into the spotlight.
Chancellor Rachel Reeves confirmed she would cut the annual cash ISA allowance to £12,000 from April 2027, meaning savers under the age of 65 would need to put £8,000 into stocks and shares in order to maximise their annual £20,000 allowance. Over 65s can continue using the full ISA allowance of £20,000 with cash ISAs, if they wish to.
HMRC also confirmed that certain ‘cash-like’ investments, potentially including money market funds, would be excluded from the stocks and shares ISAs allowance to prevent cautious savers circumventing the limit.
The government has been very vocal as well about the desire for more investment in the UK, and by April 2026, the Retail Investment Campaign is expected to be launched. The initiative is intended to raise awareness of the importance of investing for people’s future financial wellbeing and highlight the value of investing to the economy.
Whether saving or investing is best for your money will depend on your financial circumstances and your goals. For instance, it’s recommended people hold an easy to access emergency savings pot which covers three to six months of essential spending, before considering locking money away, such as in investments.
Why choose between cash ISAs and stocks and shares ISAs?
Putting money into cash ISAs or savings accounts will offer security that your money will grow over time in nominal terms.
But advocates of investing often highlight that in real terms, cash holdings tend to be eroded by inflation over time, despite a recent period when the best cash ISAs typically offered above-inflation rates – around 4.47% as of November 2025, for example.
Analysis from AJ Bell shows that £1,000 deposited into the average cash ISA when ISAs were launched in 1999 would, as of December 2025, be worth £2,079. The same investment into UK stocks via a typical UK All Companies fund would be worth almost twice as much, at £3,787.
“These figures highlight the hidden cost of playing it safe,” said Laura Suter, director of personal finance at AJ Bell. “While keeping money in cash can feel comfortable, over time it’s an almost guaranteed way to lose purchasing power.”
Stocks and shares ISA returns have outpaced cash ISAs over the past 12 months, according to the latest analysis by Moneyfacts.
The average stocks and shares ISA fund experienced a growth of 11.22% over the past 12 months from February 2025 to February 2026. There have now been three consecutive years of positive growth returns for stocks and shares ISAs. In contrast, the Moneyfacts average cash ISA rate returned 3.48% over the same period. Furthermore, the average cash ISA return is down compared to the previous 12 months.
Rachel Springall, finance expert at Moneyfacts, said: “Stocks and shares ISAs have now outperformed cash ISA returns for a consecutive year. Over the past 12 months alone, investing in stocks and shares has returned three times more to savers than a cash ISA, based on average returns.
“This should be a wake-up call for those who fear investing, as cash returns have diminished. However, it is important to not rely on returns over the shorter-term when making longer-term investment decisions.”
| 1 February 2025 to 1 February 2026 | % growth |
| Average stocks & shares ISA | 11.22% |
| Best-performing stocks & shares ISA fund sector | 38.24% (Latin America*) |
| Worst-performing stocks & shares ISA fund sector | -4.03% (Healthcare) |
| Average cash ISA rate | 3.48% |
| 1 February 2024 to 1 February 2025 | % growth |
| Average stocks & shares ISA | 11.86% |
| Best-performing stocks & shares ISA fund sector | 34.74% (Financial & Financial Innovations) |
| Worst-performing stocks & shares ISA fund sector | -11.15% (Latin America) |
| Average cash ISA rate | 3.80% |
| 1 February 2023 to 1 February 2024 | % growth |
| Average stocks & shares ISA | 2.80% |
| Best-performing stocks & shares ISA fund sector | 34.14% (Technology & Telecoms) |
| Worst-performing stocks & shares ISA fund sector | -32.46% (China/Greater China) |
| Average cash ISA rate | 3.73% |
| 1 February 2022 to 1 February 2023 | % growth |
| Average stocks & shares ISA | -3.27% |
| Best-performing stocks & shares ISA fund sector | 24.64% (Commodities and Natural Resources) |
| Worst-performing stocks & shares ISA fund sector | -32.81% (UK Index Linked Gilts) |
| Average cash ISA rate | 1.71% |
| 1 February 2021 to 1 February 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) |
| Average cash ISA rate | 0.51% |
Source: Moneyfacts
“Cash is considered a safe choice, but investing shows the gains that could be made over the longer-term,” said Springall. “Granted, past performance is not guaranteed to be repeated, so short-term gains should not be a decision maker in isolation. The past year alone laid bare the importance of seeking advice before taking the plunge to invest, some sectors boom one year and perform badly the next but can bounce back.”
How do regular investments compare to cash?
If you invested £1,000 into UK stocks every year since 1999, it would have been worth around £67,866 by the end of September 2025, AJ Bell analysis suggests, compared to just £36,290 if the same payments were made into a cash ISA.
The UK’s stock market has underperformed global competitors throughout that time period. £1,000 invested annually into global stocks would, over the same time, be worth £92,000, while putting it into US stocks would have seen the same investment grow to £127,887 – more than three times the size of the cash equivalent.
| Header Cell – Column 0 | £1,000 one-off investment | £1,000 investment every April |
|---|---|---|
| Average IA North America sector | £6,285 | £127,887 |
| Average IA Global sector | £5,158 | £92,349 |
| Average UK All Companies sector | £3,787 | £67,866 |
| Average cash ISA return | £2,079 | £36,290 |
| Average UK Gilts sector | £1,912 | £33,931 |
Source: AJ Bell/Bank of England/FE. Data from 30 April 1999 to end of September 2025. Investment figures show average performance of sector including fund charges; inflation is based on CPI measure; cash ISA returns based on average interest rate available.
“Regular investing has been particularly powerful – turning steady contributions into six-figure sums thanks to the power of compounding,” said Suter. “Over that 26-year period the investment in the average North America fund would be nearly five times the total contributions.”
Is investing in stocks riskier than cash?
In the short term, stocks are more volatile than cash and, unlike cash holdings, they can potentially lose nominal value; that is the non-inflation-adjusted value of your investments can fall, whereas cash can’t.
“Markets don’t move in a straight line and there will always be periods of volatility,” said Suter. That makes stocks riskier than cash if viewed over a short time period.
But over the long term there is evidence to suggest that stocks are a safer investment in real (inflation-adjusted) terms.
Barclays Research into the real returns on cash, UK equities (stocks) and gilts since 1899 found that the longer you hold any of these assets for, the smaller the variation in your real returns. Over 20+ time periods, the minimum and maximum return on equities was higher than the equivalent for either cash or gilts.
This divergence between how stocks compare to cash over different time periods highlights the need for a balanced approach between the two, rather than either/or.
“When it comes to choosing between a cash ISA and a stocks and shares ISA, the key question is: are you saving for the short term or the long term?” said Suter. “If you’re setting money aside for an emergency fund, typically three to six months’ worth of expenses, then a cash ISA is a solid option.”
This way, any money you need at short notice or in the case of emergency is protected and easily accessible.
But for long term goals such as retirement plans or home improvements, Suter believes a stocks and shares ISA is more effective than a cash ISA.
“Markets tend to rise over time and outperform cash, despite short-term fluctuations,” she said.
How to choose between a cash ISA and a stocks and shares ISA
There is a further blow to cash savers following the Budget, as a higher rate of income tax on savings interest held outside a tax-efficient wrapper (like an ISA) will also apply from April 2027.
Despite the new cash ISA limit there is no need to “choose” between either a cash ISA or a stocks and shares ISA. The two are not mutually exclusive, and the government is expected to make further changes to help people allocate their excess funds however works best for them.
“From April 2026 a new ‘Targeted Support’ service will be available, which could equip more people to make the right financial decisions for themselves,” said Steven Cameron, pensions director at from Aegon. “This includes understanding the benefits of moving excess cash into a stocks and shares ISA, potentially benefitting from much higher returns, albeit at the expense of the ‘no loss’ security of cash savings.”
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