Coronavirus - we're here to help
From how to access your account online, scam awareness, your wellbeing and our community we're here to help.

Skip to main content
  • rainbow over text: 'thank you NHS'
  • Register
  • Help
  • Contact us
  • Log out of your HL account

The hidden danger facing Cash ISA savers - and how to fix it

If you’re one of the 14.3 million Cash ISA savers suffering from a poor return on your money you may be happy to hear there is another option.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Cash ISA savers lost £3.3 billion last year in real terms, that’s £234 on average lost for every Cash ISA saver across the UK.

It may sound unbelievable, but sadly it’s true. So how on earth has it happened? And what could savers do to address this?

This article is not personal advice. If you are unsure, please seek advice.

Why are Cash ISAs losing money?

Cash ISAs are paying a pitiful 0.86% interest each year on average, well below 2.1%, the current rate of inflation.

So, even though your Cash ISA is rising in value, the prices of the things you want to buy are climbing faster.

When you take into account inflation, the average Cash ISA is currently losing 1.24% every year.

Most people should have at least three to six months’ worth of expenses in accessible cash to cover any short-term emergencies. While the bad news is interest rates on your cash are unlikely to rise any time soon, the good news is that once the emergency cash has been covered, there’s another option for those who are happy with the additional risks.

Get a better return on your ISA

Some savers are turning to the stock market in the hunt for better returns on their ISA pots.

In fact, a recent independent survey found poor Cash ISA returns was the number one reason why people started investing in the stock market.

It’s easy to see why, when you look at the difference in returns between the stock market and Cash ISAs.

Value of £1,000 in the UK stock market vs average Cash ISA

Scroll across to see the full chart.

Past performance is not a guide to future returns. Source Lipper and Bank of England, correct as at 5 September 2019

Investing in the stock market has historically provided the best chance of beating inflation over the long term. Since the end of 2010 the UK stock market returned over 77% growth compared to 11.6% for the average Cash ISA. Past performance is not a guide to the future.

It’s important to remember that unlike interest paid on cash, investment growth and income are not guaranteed. Your investments can rise as well as fall in value and you could get back less than you put in.

Don’t mistake risk for gambling. While they both involve taking a risk for the aim of future profit they are very different beasts. Gamblers are focused on the short-term, they place a bet on the outcome of an event. In general the odds are stacked against them.

Investors on the other hand use their money to purchase stocks and other assets which the information they have suggests will provide them with an income and/or profit over the long term. Investors need to have a long-term view, and put their money into businesses they can see a bright future for.

While few of us find gambling appealing, anyone can invest in the stock market. In fact, if you’ve got a pension with your employer, chances are you’re already an investor.

Ready to invest?

If you’re happy with the additional risks, transferring your Cash ISAs to a Stocks and Shares ISA and investing in the stock market is quick and easy. We’ll do all the hard work for you.

You won’t lose your ISA wrapper. And transferring Cash ISAs opened over previous tax years won’t count towards your ISA allowance for this tax year. If you decide in future that you would like to switch back to a Cash ISA, this is possible.

Tax rules can change and benefits depend on personal circumstances.

Once you’ve read our terms and conditions (including tariff of charges), key features and important investment notes, and checked you will benefit and won’t incur excessive exit penalties, all you need to do is:

  1. Download and complete a simple transfer form
  2. Return it to us and we'll take care of the rest of the transfer and keep you updated

If you know where you’d like to invest the cash once your transfer completes you can provide investment instructions on the transfer form. Alternatively, you can wait until your transfer is complete before deciding.


Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Editor's choice – our weekly email

Sign up to receive the week's top investment stories from Hargreaves Lansdown. Including:

  • Latest comment on economies and markets
  • Expert investment research
  • Financial planning tips
Sign up

Related articles

Category: Investing and saving

Follow your plan, not the herd

Following the crowd is rarely a good idea. It’s a particularly dangerous way to invest.

Emilie Stevens

03 Jun 2020 5 min read

Category: Investing and saving

ISA millionaire – 'You've certainly got to be prepared to take the downs as well as the ups'

One of our clients, Mr B from London, shares how he built his ISA to over £1 million.

Charlotte Wheeler

03 Jun 2020 5 min read

Category: ISAs

Millionaire habits – how others have achieved investing success

We look at the most successful habits of some of our millionaire investors, how they’ve built their fortune and what you could learn from them to grow your own wealth.

Nadeem Umar

02 Jun 2020 4 min read

Category: Retirement

How annuities can help protect your retirement income from falling stock markets

Not looking to delay your retirement? We take a closer look at how an annuity could help protect your retirement income from falling stock markets.

Isabel McDougall

02 Jun 2020 4 min read