Investors Shift from cash ISAs to Stocks and Shares ISAs Amid planned reforms
Investors shift from Cash ISAs to Stocks and Shares ISAs, with new Cash ISA accounts down 7% over five years and Stocks and Shares ISA value up 37%. Chancellor Rachel Reeves plans ISA reforms, but Stocks and Shares ISAs remain popular despite delays.
Fall in cash ISAs
Investengine research found that new Cash ISA accounts fell 7% over five years, despite recent government proposals to overhaul the ISA regime. Between the years 2018/19 and 2022/23, the amount held in Cash ISAs increased only by 9%, and subscription levels fell from 8.5 million to 7.9 million.
Increase in stocks and shares ISAs
In contrast, the Stocks and Shares ISA increased 57% over the same time, with the value they hold increasing by 37%. This leaves a combined £431 billion invested in Stocks and Shares ISAs, 46% more than the £294 billion in Cash ISAs. There are now 3.8 million retail investors who have a Stocks and Shares ISA, up from 2.4 million in five years.
Government reforms and investor awareness
Chancellor Rachel Reeves confirmed in the Spring Statement that the government will revamp the ISA system, with plans revealed in the Autumn Budget. Rumours of cutting the Cash ISA limit from £20,000 to £4,000 were shelved. Stocks and Shares ISAs continue to be more popular despite the reforms being delayed. A survey found that only 31% of Brits have a Cash ISA, and 16% have a Stocks and Shares ISA, and 17% of UK adults have never even heard of Stocks and Shares ISAs.
Andrew Prosser, Investengine's head of investment, said, "While the reforms have been pushed back, our analysis indicates that stocks and shares ISAs are growing in popularity without the direct need to make cash ISAs unattractive. Even with historically low interest rates throughout the pandemic coming to an end, the amount of cash accounts opened hasn't yet recovered."
