Latest HMRC annual savings statistics for Individual Savings Accounts (ISAs), Child Trust Funds and Help to Save accounts, shows cash ISAs increasing and stock and shares ISA investment decreasing, demonstrating a need for further ISA simplification to promote a culture of investing and long-term saving, says Ed Monk associate director, Fidelity International.
Today’s figures from HMRC show that cash was king in the 2022/23 tax year, with cash ISAs rebounding strongly since their pandemic lows. Subscriptions to Cash ISAs rebounded to 7.9 million, marking a sharp contrast to the 2021/22 data, where cash ISA subscriptions fell to 7.1 million as the pandemic drove a surge in Stocks and Shares ISAs.
As interest rates climbed steadily – from 0.25% in January 2022 to a peak of 5.25% by August 2023 – savers continued to funnel money into cash. Bank of England data revealed a record £9 billion deposited into cash ISAs in April 2023 alone.1
It may have made sense to up your cash savings while returns have been strong, but now is a good time to reassess your balance of cash and investments. HMRC’s data highlights the significant bias that UK savers show towards cash rather than investments, with 7.9 million savers holding a cash ISA compared to just 3.8 million having a Stocks and Shares ISA.
With inflation proving stubborn but rates on cash now falling, cash savers face lower real returns on their money in the coming years. Investing means you run the risk of losses, of course, so should only be undertaken by those comfortable with that risk. But the long-term record of investments suggests they have had a better success rate in beating inflation than cash. Investing, even in small amounts, can help mitigate the effects of inflation over the long term, opening the possibility of higher returns and protect your financial future.
The figures today also reveal a gender disparity. Despite holding 51.8% of all ISAs, females hold only 42.6% of Stocks & Shares ISAs. In the 2021/22 tax year, 1.9 million men subscribed to a Stocks and Shares ISA, compared to only 1.4 million women. Data from our recent Women and Money study shows that while 28% of women hold an investment product, this lags behind the 51% of men who do.2 Meanwhile, 93% of women have a current account, 72% have a savings account and 38% hold a tax-free savings account like a cash ISA.
This stark gender gap in investing means women risk missing out on the potential growth opportunities that come from investing in the stock market. It’s crucial that the industry works to ensure women feel empowered and engaged to invest, seeing it as a viable option for them.
It’s promising to see a new generation of savers as Junior ISA accounts increased from 1.21 million in 2021/22 to 1.25 million in 2022/23. Figures from Fidelity International show a similar increase in both JISA and JSIPPs over recent years, as families look to invest for their children’s future. The number of JISAs opened between December 2020 and June 2024 has almost tripled – with an uplift of 10% since last December (2023) alone3.
Similarly, JSIPPs have also grown in popularity, with an eight-fold increase between December 2020 and June 2024, and an uplift of 43% since last winter.
Fidelity continues to believe that simplification is needed and that there is an opportunity to support consumers to transition from a cash savings culture into longer-term investing. This could be achieved by combining Stocks and Shares and Cash ISA products as well as improving the ease of transfers. Short term needs are well served, but it leads to consumers holding large cash balances for too long, missing out on higher investment returns.
