UK savers would be £46bn richer today if they had invested in stocks and shares ISAs rather than cash ISAs, suggests data compiled by UBS Smartwealth following Freedom of Information requests.

The data analysed by UBS Smartwealth shows that, in the last five years, the UK public has invested £239bn in cash ISAs, which is over 70%, and only £101bn in stocks and shares ISAs.

Head of UBS Smartwealth UK, Nick Middleton commented: “As a nation of savers, we’re addicted to cash. It’s not healthy to have so much of our wealth in an asset that has been returning so little. Low interest rates are the new normal, but savers still haven’t adapted. As a result they have collectively lost billions.”

UBS Smartwealth estimates that “if cash ISA investments had instead been made into stocks and shares ISAs during this 5-year period, UK savers would be £46 billion better off”.

Centapse founder Greg Davies said there are three primary behavioural reasons as to why savers choose cash ISAs over stocks and shares ISAs.

Davies commented: “I think fundamentally, at its heart, this is a behavioural problem.
“People do not buy numbers; they buy stories. And, if we try to feed them a rational argument as to why or how they should get invested, they would be quite capable of understanding it, quite capable of believing in it and yet still fail to act on it.”

Davies stated that one of the primary reasons savers choose cash ISAs over stocks and shares ISAs is due to their complexity. He further commented: “For most people who aren’t financial professionals, the worry is that ‘I don’t know how to do the perfect thing’ or ‘I don’t know exactly what the right thing is to do’ so it feels more comfortable doing nothing at all.”

The Centapse founder suggests that phased investing could overcome the issue with stocks and shares ISAs being too complex, as it is “a cheap and efficient way of buying emotional comfort”.

Share Story: