The UK’s HMRC has published a report on the amount of savings held in ISAs, LISAs and Child Trust Funds. It says that around 12.4 million Adult ISA accounts were subscribed to in 2022 to 2023, up from 11.8 million in 2021 to 2022.
Similarly, the number of cash ISAs subscribed to increased by 722,000. As a result, the share of accounts subscribed to in cash has risen to 63.2%, a 2.5% growth from 2021 to 2022. Meanwhile, the number subscribing to stocks and shares ISAs decreased by around 126,000.
The growth in cash ISAs can be attributed to several economic and behavioural factors. Over the past couple of years, the Bank of England has significantly raised interest rates to combat inflation. As a result, cash savings, including cash ISAs, have become more appealing due to their now higher returns compared to previous years. Savers who were previously discouraged by low interest rates may now favour cash ISAs for their perceived safety and improved yields.
At the same time, persistent stock market volatility—driven by geopolitical tensions and concerns over a global economic slowdown—has made some investors wary of stocks and shares ISAs.
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Wes Wilkes, CEO at Net-Worth NTWRK commented: “The rise in cash ISA subscriptions versus a fall in stocks and shares ISAs is indicative of two things. One is that we’ve seen ‘actual’ interest rates during this period for the first time in over 10 years and, second, a real and worrying demonstration of a lack of access to financial advice. It is extremely likely that a proportion of savers are using these cash ISAs as part of their future plans and while 5% will be nice for the couple of years it’s fixed for, the rate cliff that will occur once they finish leaves them with significant interest rate risk at a time where the stock market is returning significant double digits above inflation.”
UK facing significant financial advice gap
The UK is currently facing a significant advice gap. Rising costs driven by stricter regulations have made financial advice inaccessible for many, while the number of advisers in the industry continues to decline.
Despite advances in technology, many people still seek personal guidance and support when making crucial financial decisions. Successive governments have failed to address this issue, leaving countless individuals without access to the guidance they need.
David Belle, Founder and Trader at Fink Money commented: “The culture of investing in the UK is broken. You’re told not to do things constantly. You’re told that everything is high risk and you could lose all your money. Or that you don’t earn enough to make investing even viable. Risk needs redefining in the UK because we have really lost our way. How many people would even know they can simply invest in the US via a UK stocks and shares ISA? They might just be looking at the return profile of UK PLC and thinking ‘what’s the point?’ Risk and people’s approach to it needs to be redefined in this country, but the structure is not set up for it in my view, and that starts at the top.”
Joshua Gerstler, Chartered Financial Planner & Wealth Manager at The Orchard Practice added: “Hard working Brits are missing out on hundreds of thousands if not millions of pounds by wasting time with Cash ISAs. To grow your wealth over the long term, a Stocks & Shares ISA is a must.”
