Cash vs Investing: Investors more than triple their money, cash savers barely beat inflation

• A one-off £1,000 investment in 1999 when ISAs launched would now be worth £6,285 in the average North America fund, while investing £1,000 annually would have generated £127,887 
• The same one-off payment into a cash ISA in 1999 would be worth £2,079 today, while a £1,000 annual Cash ISA contribution would have grown to £36,290  
• Global investment sector turns a one-off £1,000 investment into over £5,000, while a £1,000 annual investment could have grown to more than £92,000 
• Even the UK companies all sector average turned a £1,000 annual investment into £67,866 
• November Budget expected to see cash ISA allowance cut as government aims to boost retail investing  

New analysis from AJ Bell shows the dramatic difference between keeping money in cash and investing it over the long term. Since 1999, when ISAs were launched, stock market investments have significantly outpaced both inflation and cash savings – with investors building far greater wealth despite short-term market ups and downs.

Rachel Reeves’ second Budget is widely expected to include a cut to the cash ISA allowance in an effort to ‘get the balance right between cash and equities to earn better returns for savers’. The analysis shows investing could help savers enjoy better long-term growth on their money, although the proposed cash ISA cut has been strongly opposed as a plan for boosting investing, with Treasury Committee MPs and firms including AJ Bell criticising the plans.   

The analysis shows a one-off £1,000 investment made in April 1999 would now be worth £6,285 if invested in the average North America fund, compared to just £2,079 if held in the average cash ISA. Even UK equity funds, despite two decades of market challenges, would have grown the original £1,000 to £3,787, comfortably beating cash returns and inflation over the same period. 

Those who invested £1,000 every year since 1999 would now have portfolios worth £127,887 if they had invested it in North American funds, £92,349 if it was in global funds, and £67,866 if invested in UK equities. By contrast, regular savers in a cash ISA would have built up just £36,290, while the same annual saving would be worth £40,717 had it tracked inflation each year – meaning cash savings have lost real spending power. 

Even over the past year, investments have pulled ahead. A £20,000 lump sum invested in October 2024 would have grown to £22,612 in North American funds, compared to £20,698 in a cash ISA and £19,661 in Gilts. Inflation over the same period rose to £20,760, meaning cash savers once again fell behind in real terms. 

Laura Suter, director of personal finance at AJ Bell, comments: 

“These figures highlight the hidden cost of playing it safe. While keeping money in cash can feel comfortable, over time it’s an almost guaranteed way to lose purchasing power. Inflation quietly eats away at savings, and even the average cash ISA will have struggled to keep pace. 

“By contrast, investors who were willing to take on some risk have been handsomely rewarded. Looking at someone who had invested £1,000 26 years ago, that would now be worth £6,285 if invested in the average North America fund, compared with just £2,079 in a cash ISA over the same period.  The average Global fund turned £1,000 into £5,158, showing that spreading investments worldwide still comfortably beat both inflation and cash. By contrast, UK gilts, which are often seen as a safe haven, have lagged badly, rising to just £1,912, failing even to keep up with the cost of living. 

“Regular investing has been particularly powerful – turning steady contributions into six-figure sums thanks to the power of compounding. Over that 26-year period the investment in the average North America fund would be nearly five times the total contributions. While if that money had gone into Global funds it would be more than triple the investor’s contributions over that time.

“Of course, markets don’t move in a straight line and there will always be periods of volatility, but history shows that patient investors are consistently better off than those who leave their money languishing in cash. 

“Even looking over a shorter timeframe, and despite higher interest rates in the recent past, investors have fared better than cash savers. Cash savers again lost ground in real terms, while equity investors saw genuine growth. The lesson is clear: if you want your money to work harder than inflation, you should consider taking some risk and investing for the long term.

“Of course, these are only averages. Savers who chased the top-paying cash ISAs would have done better – but equally those who left their money sitting in old savings accounts or their current account earning little interest would have fared far worse. By the same token, investors who picked the best-performing funds could have made far more than the average figures suggest – while those who picked a dud could have lost money.” 

Cash can still be king  

“That’s not to say that everyone should ditch cash and bonds, as safe havens have a key role to play in people’s portfolios. Some people prefer the security of knowing their money is safe from market fluctuations, while others need a short-term home for their money or easy-access savings. But it shines a light on the missed wealth for those who are defaulting to cash and not taking that first step into investing. Being in cash should be a conscious decision, rather than unthinkingly hoarding it. 

“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? 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. It keeps your money accessible while offering tax-free interest. But if you’re looking at medium- to long-term goals, such as saving for retirement alongside a pension, for a house deposit, home improvements in future or a career break, then a Stocks and Shares ISA could be a more effective route, given that markets tend to rise over time and outperform cash, despite short-term fluctuations.”