Since 1999 the average stocks and shares Isa fund has beaten the average cash Isa rate in 12 out of 19 tax years.
Over the 2017/18 tax year, the average stocks and shares Isa fund has grown by 4.8 per cent while the average cash Isa rate was 0.97 per cent over the same period, according to research by Moneyfacts.
Cash Isas have long been a go-to savings account for people who are looking to take advantage of their tax-free allowance, but since the Bank of England cut interest rates to 0.5 per cent in March 2009 cash Isa rates and savings rates generally have dwindled.
Over the past year, in particular, savers have been ditching their cash Isas, resulting in the amount of money invested in stocks and shares Isas overtaking the amount deposited in cash Isas.
Richard Eagling, head of pensions and investments at Moneyfacts, says: ‘The nature of investing in the stock market will always involve fluctuating returns but the long-term performance of stocks and shares Isas remains attractive.’
Over the 2017/18 tax year, the best best-performing stocks and shares Isa fund sector was Japanese Smaller Companies which returned 25.5 per cent, followed by China/ Greater China with 24.7 per cent and UK Smaller Companies with 15.3 per cent.
The best-performing Isa fund was Jupiter UK Smaller Companies with 35 per cent returns.
-Shares versus cash: which has made the best returns since 1995?
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This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.
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