What happens to £20,000 in a Cash ISA vs a Stocks & Shares ISA?

For decades, the majority of savers in the UK have believed that putting their money into a Cash ISA and letting it grow, safely and tax-free,* is the best way to put side any excess income. This does sound appealing, but large investments into cash rather than shares have quietly drained opportunity from a generation of would-be investors and also starved the UK economy of capital.

As the country’s stock market faces mounting challenges — from delistings to declining investor confidence — it’s time to ask a hard question: is the Cash ISA actually a good choice?

Let’s start with the numbers. If you put £20,000 in a Cash ISA earning 4% interest (a generous rate by historical standards), here’s how it would grow:

• After 5 years: £24,333
• After 10 years: £29,605
• After 20 years: £43,822

However, inflation eats away at these gains. In real terms, your money barely grows, especially when inflation rises above the Bank of England target of 2%.

Now consider a Stocks and Shares ISA, invested in a global equity fund such as the MSCI World Index, with an average annual return of 7% (after fees):

• After 5 years: £28,051
• After 10 years: £39,343
• After 20 years: £77,145

After adjusting for inflation, that’s nearly double the real return compared to cash, though it’s worth remembering that past performance is not a guarantee of future results. And yet, most people in the UK still choose cash. Of course, the market goes through dips and spikes, so any capital earmarked for stocks needs to be invested for the long term. 

How to invest in a Stocks & Shares ISA with us

For those looking invest in Stocks & Shares ISA with us, here's a straightforward approach:

1. Learn more about the Stocks & Shares ISA
2. Download the IG Invest app or open a share dealing account online
3. Search for your desired stock on our app or Stocks & Shares ISA account
4. Choose how many shares you’d like to buy
5. Place your deal and monitor your investment

Investors aim to grow their capital through share price appreciation and, where applicable, dividends. However, it’s important to remember that the value of investments can go down as well as up. Past performance is not a reliable indicator of future results, and you may get back less than you originally invested.

With us, you can access a wide range of shares available 24/7 on our industry-leading weekend trading platform.

Not quite ready to invest real money? Our demo account lets you practise in a risk-free environment to get a feel for the platform. You can also boost your knowledge with IG Academy, our free education hub offering online courses, live webinars, in-person events, and a full library of video tutorials.

When you buy shares with us, you’ll benefit from zero commission* and can earn 4.25% AER variable interest on uninvested cash balances up to £100,000. Interest is paid in any month where you’ve placed a trade or held an open position.*

Prefer a more hands-off approach? Our Smart Portfolio ISA offers a fully managed, diversified, and tax-efficient investment solution. With competitive fees and transparent performance reporting, you can parallel your investments with your personal risk profile. Simply select this option when setting up your account.

If you're looking to support home-grown businesses, we make it simple to invest in UK-listed companies, from fast-growing innovators to established household names. By adding UK shares to your ISA, you’re not just aiming for returns, you're helping fund the future of British enterprise. 

A false sense of security

Ever since ISAs were introduced back in 1999, UK investors have preferred to play it safe with cash rather than invest in shares. However, our analysis indicates that UK cash savers have seen just one-seventh of the real returns (after inflation) compared to UK investors over these past 26 years.

And instead of shifting toward investment, we’re moving backwards. In the 2022–23 tax year, Cash ISA subscriptions rose by 722,000, with £4.7 billion more saved — while Stocks and Shares ISAs fell by 126,000, with £6.2 billion withdrawn.

This is despite the fact that most people don’t even save tax by using a Cash ISA. Basic rate taxpayers can already earn up to £1,000 in interest tax-free, and they make up 90% of ISA users. At 4% interest, that means you’d need over £25,000 saved before you pay a single penny in tax. In many cases, people could achieve the same outcome through Premium Bonds or ordinary savings accounts.

ISA tax relief currently costs the UK government £9.4 billion per year. Yet much of that is used to shelter low-interest, low-return savings. If just 20% of the 2022–23 Cash ISA funds had instead gone into Stocks and Shares ISAs — and half of that into UK equities — it may have:

• Directed £4 billion into UK-listed companies
• Saved the Treasury £2 billion in wasted relief
• Supercharged long-term wealth building for individual savers

This is not just about personal finance but also national strategy. We’re subsidising stagnation, when we could be fuelling growth — and given the current state of the country’s finances, change may be needed.

Reforming the ISA market

That’s why policymakers are being urged to take action. Our ‘SOS: The Survival Plan’ is a call to rescue the UK stock market, proposing ending new Cash ISAs entirely from April 2026, using that saved capital and tax relief more effectively by:

• Scrapping Stamp Duty on UK shares — this outdated 0.5% tax discourages people from investing in British businesses and distorts our capital markets. Abolishing it could grow the UK economy by up to 0.8%, according to analysis by the Centre for Policy Studies and Oxera.
• Creating a UK Equities Investment Scheme (UEIS) — modelled on the successful Enterprise Investment Scheme, this would offer 20% income tax relief for retail investors who use their Stocks and Shares ISA to back UK-listed companies for at least three years.
• Ending the culture of fear around investing — regulatory overcaution has made investing feel inaccessible or risky to ordinary people. Financial promotions often focus on what could go wrong rather than highlighting that there are risks involved with both cash and shares.

ISAs were designed to encourage people to save and invest for their future, tax-free. But somewhere along the line, we’ve equated safe with good, even when it’s costing individual investors real growth and costing the country real investment.

We need to rebuild public trust in investing, not through hype, but through education, incentives and smarter policy. With the right reforms, ISAs could become what they were always meant to be — a way to grow personal wealth and national prosperity at the same time.

£20,000 sitting in a Cash ISA is a missed opportunity. For the would-be investor, it means lower real returns. For the UK, it means less capital for businesses, fewer jobs and a weaker economy — though of course, in some situations the Cash ISA comes with its own benefits.

£20,000 growth in a cash ISA vs the stock market summed up

• £20,000 in a Cash ISA at 4% interest grows to just £43,822 after 20 years — and even less in real (inflation-adjusted) terms. Most UK savers still favour this low-growth option
• The same £20,000 invested in a global equity index could grow to £77,145 over 20 years, nearly double the inflation-adjusted return compared to cash
• Despite better long-term outcomes, Stocks and Shares ISA uptake is falling. This limits personal wealth-building and starves the UK economy of capital
• Policy proposals include scrapping stamp duty on shares, launching a UK Equities Investment Scheme, and ending new Cash ISAs by 2026, to channel savings into higher-growth investments that benefit individuals and the wider economy

*Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.

*Other fees may apply.

*For full terms and conditions, see our fees page.