A cash ISA saver maxing out their annual allowance every year since the product launched in 1999 may have lost out on more than £134,000 in real wealth creation compared to those investing in UK shares, research by IG has found.

The trading platform said this figure shows the cost of prioritising cash over investing for the long-term.

IG’s analysis comes ahead of the Chancellor’s Mansion House speech on 15 July, with Rachel Reeves expected to reduce the cash ISA allowance from £20,000.

The investment firm’s study found that if the total contributions towards cash ISAs and investments in FTSE 100 companies had been the same since 1999, cash ISA savers would average an annual cash interest rate of 2.85%.

Meanwhile, investors who put their full allowance into the FTSE 100 would have achieved an average annual return of 4.4%.

As a result, cash ISA savers would receive £23,1999 in real wealth creation, compared to £157,591 for FTSE 100 investors, accounting for inflation.

IG added that while most savers don’t max out their ISA allowance each year, its analysis and the difference in real returns as a percentage "holds true" for those making smaller contributions each year.

UK managing director at IG, Michael Healy, said: "Only by building a true culture of investing will UK households have the opportunity to grow real, long-term wealth. Many savers will be reluctant to take their first step, but with a long-term view, investing in the stock market should be a no-brainer.

"Since the launch of the cash ISA in 1999, the FTSE 100 has delivered negative returns in only seven years - and other global markets have performed even more strongly. In contrast, between 2008 and 2020, average cash ISA rates hovered around just 1.5%, well below inflation, which averaged 2.6%. Volatility may be uncomfortable in the short term, but the long-term erosion of purchasing power is a quieter risk that deserves a louder warning.

"There’s speculation the Chancellor may cut the tax-free allowance for cash ISAs to encourage more investing. But the time for gentle nudges is over - we need a bold reset to get Britain’s money moving. Fully scrapping the cash ISA is the only way to break the cycle and ensure savers are properly incentivised to think beyond cash and start building genuine long-term wealth."

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