Stocks & shares ISAs are on course to record their third consecutive tax year of growth, research from Investment Life & Pensions Moneyfacts revealed, and not only that, but they're performing far better than their cash equivalents.
The research shows the real value of investing in stocks & shares ISAs, with key findings including:
As things stand, this means that 2014/15 is on course to be the third consecutive tax year in which the average stocks & shares ISA fund has delivered positive growth. In fact, the average growth rate of 7.4% so far this tax year follows on from even stronger gains of 13.8% in 2012/13 and 9.4% in 2013/14.
By contrast, the average interest rate on cash ISAs (both fixed and variable rate ISAs) during the course of the 2014/15 tax year is just 1.53%. The table below highlights these differences in more detail, and shows that, for those who picked their funds wisely, returns of up to 58% could have been achieved.
Table 1: Average ISA performance during 2014/15 tax year (Source: Investment Life & Pensions Moneyfacts/Lipper)
The market may be volatile, but it's also worth noting that 975 out of the 1,075 ISA funds surveyed – or 90.7% of them – have enjoyed growth during the current tax year. The case for stocks & shares ISAs becomes even stronger when you consider some of the other findings from Moneyfacts' latest ISA survey:
Richard Eagling, head of pensions and investments at Moneyfacts, commented on the findings: "The amount held in ISAs is set to rise sharply over the coming weeks as savers look to take advantage of the much higher ISA limits and greater flexibility now in place. Whether this expected surge of money into ISAs will be allocated to the areas most likely to deliver the growth or income that individuals crave is, however, a major concern.
"Worryingly, cash ISAs remain the default choice for many investors despite record low interest rates. With the amount of money that can now be held in a cash ISA almost triple the previous limit, the fear is that old habits will die hard and the opportunity to invest differently could be lost. Demonstrating the higher returns consistently delivered by ISA funds could ultimately be key to improving the uptake of stocks & shares ISAs."
So, what will you do with your allowance? The research clearly highlights the need for savers to consider stocks & shares ISAs rather than sticking to cash, with the potential returns on offer far outweighing average cash ISA rates. However, given the higher level of risk involved, careful consideration – and ideally financial advice – will be necessary. Read more about these ISAs in our guide to see if they'll be worth considering, and check out our stocks & shares ISA picks if you're ready to consider your options.
See our stocks & shares ISAs
Find the best cash ISA rates
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