UK savers have collectively missed out on an estimated £1.9tn in potential returns by avoiding stocks & shares, according to new analysis from Chelsea Financial Services.
As of 2024, £856bn has been contributed to cash Isas compared to £453bn in stocks & shares. In that 25-year period, global equities delivered six times the return of cash (+474% vs +80%), based on the MSCI World Index and Bank of England base rate.
“Cash has its place for short-term needs. But history shows that over the long term, investing in equities, even through a balanced portfolio, has consistently delivered higher returns,” stressed Darius McDermott, managing director at Chelsea Financial Services.
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These findings highlight that savers’ sentiment often runs counter to stock market performance, with cash typically being favoured at the worst possible moments.
In 2009-10, only 27% of Isa contributions went into stocks and shares, yet equities went on to consistently outperform cash (+523% vs +14%) over the next 14 years.
McDermott added: “Timing the market is notoriously difficult. A long-term, disciplined investment strategy through a stocks & shares Isa has consistently been the smarter approach.
“Many savers still default to cash because it feels safe. There are plenty of lower-risk options available, such as bond funds, multi-asset funds, and absolute return strategies, for savers who are cautious.”
Since the junior Isa (Jisa) is locked until a child turns 18, it’s inherently a long-term investment. Yet three-quarters of contributions in the year it was introduced went into cash.
That decision has led to savers missing out on +300% in performance, equating to £7bn in lost returns, with global equities at +313% and cash for +12%, respectively.
Encouragingly, this trend has begun to shift. In the 2023-24 tax year, over £1bn was invested into stocks & shares for the first time – almost two-thirds of all Jisa contributions.
“Parents want the best for their children, but many still misunderstand the purpose of a Jisa. When the money is locked away for 18 years or more, keeping it in cash simply doesn’t make sense.
“A stocks & shares Jisa gives children a far greater chance of a meaningful financial head start in adult life. Failing to realise this is one of the biggest investing mistakes parents can make,” said McDermott.
