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Stocks & shares ISAs continue to perform

Stocks & shares ISAs continue to perform

Category: ISAs

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

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:

  • The average stocks & shares ISA has posted growth of 7.4% during the 2014/15 tax year so far.
  • This compares with an average cash ISA rate of 1.53% during the course of the 2014/15 tax year.
  • The average stocks & shares ISA has now posted positive growth in 10 of the 16 tax years since the introduction of ISAs back in 1999.

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)

2014/15 Tax Year % Growth
Average Stocks & Shares ISA 7.4%
Average Cash ISA 1.53%
Best performing Stocks & Shares ISA Fund Sector 18.9% ( North America)
Best performing Stocks & Shares ISA Fund 58.2% (AXA Framlington Biotechnology Fund)

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:

  • The average stocks & shares ISA fund has now grown by 174% in the 16 years since the introduction of ISAs. The best performing ISA fund over that period (Marlborough Special Situations) has posted growth of 1,609%.
  • Only three funds out of 458 stocks & shares ISA funds that have been available since ISAs were first introduced have delivered a loss. All bar five funds have delivered double-digit growth.

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.

What next?

See our stocks & shares ISAs

Find the best cash ISA rates

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.