According to HM Revenue & Customs’ statistics, the overall number of indivudual savings accounts (Isas) opened fell from 10.1 million in 2015/16 to 8.5 million in 2016/17.
But at the same time the amount of money held in adult stocks and shares Isas now stands at £315bn ($408bn, €344bn) compared to £270bn in cash Isas.
The amount of money subscribed to stocks and shares Isas reached a record high last tax year of £22.3bn, up from £21.1bn in 2015/16. The number of people subscribing to these products also increased to 2.59 million, from 2.54 million.
The figures are no big surprise given low interest rates in recent years have disappointed consumers wanting a positive return on their money in real terms, especially against a backdrop of rising inflation.
"Stocks have a 68% chance of beating cash if invested over a two-year period, and this jumps to 99% over an 18-year period."
Add to this the introduction of the personal savings allowance last tax year, which allows basic rate taxpayers to receive £1,000 of cash interest tax-free each year, as well as a cut in interest rates last August, and the attractiveness of Isas across the board has dwindled.
Given this, it’s not a shock that people have opted for the potential added return from investing in stocks and shares rather than cash.
According to figures from the Barclays Equity Gilt Study, which compares returns from stocks with cash since 1899, stocks have a 68% chance of beating cash if invested over a two-year period, and this jumps to 99% over an 18-year period.
Industry to blame for dwindling interest
But despite the modest increase in stocks and shares Isas, a number of industry participants believe the investment industry has failed by not educating the consumer adequately about the perils of holding cash and the benefits of investing in the stock market.
Stuart Millson, managing director and co-founder at Broker Compare, believes the modest increase in the amount saved into stocks and shares Isas is “a damning indictment of those of us in the investment industry”.
“Low rates of interest are being blamed, which would suggest more people would seek out the higher returns of stocks and shares. However, the amount invested in stocks and shares ISAs rose by just £1.2bn – a damning indictment of those of us in the investment industry,” he says.
And Millson believes this shortcoming is even more stark when demographics are considered.
