HMRC figures for 2023/24 show that over the past 10 years, growth in Cash ISA subscriptions outpaced Stocks and Shares ISAs by a very wide margin.
In other words, cash remains king for most people in the UK.
Yet I’m going to continue going against this trend in 2026. Here are three key reasons why.
Falling rates
Last week, the Bank of England cut interest rates to 3.75%, the fourth rate reduction since the start of 2025 (when the figure was 4.75%).
Looking ahead, the market is expecting further cuts in 2026, with rates potentially ending the year as low as 3%.
The problem here is that if I’m earning, say, 3% interest on cash in 2026, but prices rise by 3.25%, my real return is wafer-thin. I’m barely protecting my purchasing power inside a Cash ISA.
Opportunity cost
Moreover, there could be a significant opportunity cost. That’s because the stock market is the only asset class that consistently beats inflation by a significant margin over the long run.
This is clear when we look at the performance of the FTSE 100 this year. It has surged 21% before dividends, marking a fantastic year for the UK’s blue-chip index.
The FTSE 100 doesn’t jump so much every year, of course. A 21% return is very much an outlier, and some years the index falls by double digits.
But personal finance guru Martin Lewis recently highlighted how dramatically the stock market has outperformed over the last decade. Here’s how £1,000 would have fared in cash versus stocks.
| Total return after 10 years* | |
|---|---|
| Top UK cash savings | £1,270 |
| FTSE 250 | £1,640 |
| S&P 500 | £3,790 |
Note, someone would have needed £1,390 just to maintain their purchasing power.
So, in real terms, they would have lost money over this period by being in cash. Meanwhile, another person invested in a simple S&P 500 or FTSE 100 index fund would have done significantly better (the FTSE 100 has outperformed the FTSE 250 in recent years).
Even bigger opportunity cost
The final reason I’m not putting all my savings into a Cash ISA is that the opportunity cost could potentially be even bigger. That’s because some individual shares dramatically outperform index averages over time.
Below is the performance of a selection of popular household-name stocks over the past five years.
| Stock | 5-year share price return |
|---|---|
| Rolls-Royce (LSE:RR) | 845% |
| Lloyds | 152% |
| Alphabet (formerly Google) | 263% |
| Tesla | 122% |
Admittedly, this strategy can be more risky because there’s no guarantee a portfolio of stocks will beat the market average (or even make a positive return). But it shows what’s possible.
The stellar Rolls-Royce performance stands out here, of course. Five years ago, the stock was in the doldrums as the engine maker was left close to bankruptcy after flights were grounded during the global pandemic.
However, a quite remarkable turnaround has taken place under new management, with profitability restored and the balance sheet strengthened considerably. This has allowed Rolls-Royce to start paying dividends again.
But after its stunning run, the stock now looks quite pricey. It’s trading at 35 times next year’s forecast earnings. Unfortunately, at this price, I think buying the stock could be quite risky, as it leaves little margin for error (slower-than-expected growth, for example).
The good news is that there are plenty of other opportunities outside Rolls-Royce to weigh up. This is what I’ll focus on next year, as I aim to build wealth inside a Stocks and Shares ISA rather than a Cash ISA.
