Millions of UK savers could be missing out on billions in investment returns

A new report has revealed how millions of UK savers could be missing out on billions in investment returns.

Research by the UK government found that the UK has the lowest level of retail investing among the G7 countries, and a significant portion of individual wealth is held in low-interest cash accounts. It estimates that around 29 million UK adults have savings in accounts returning around 1% interest. Meanwhile, the average return for stocks and shares over the last decade is around 9%.

So, by holding your wealth in cash savings accounts, you could be missing out on significant investment returns.

One of the key areas that could come under review in a bid to challenge the UK’s propensity to save rather than invest is ISAs. Indeed, there has been widespread speculation that the chancellor, Rachel Reeves, may make changes to ISA allowances in the upcoming Budget to encourage more investment via Stocks and Shares ISAs, although this remains to be seen.

Read on to find out how holding your money in savings accounts could be holding you back from considerable returns.

Money held in Cash ISAs could miss out on £100,000s

Cash ISAs and Stocks and Shares ISAs are the two most popular ISAs available.

Cash ISAs offer security and guaranteed interest. Stocks and Shares ISAs can rise and fall in value but are more likely to deliver strong returns over time.

For the 2025/26 tax year, you can save or invest up to £20,000 across all your ISA accounts. Additionally, you can contribute to someone else’s allowance, including the Junior ISA allowance, which is £9,000 a year. However, Reeves could reduce the amount you can save in Cash ISAs to boost investment, but as noted, this hasn’t been confirmed.

A report from Paragon found that as of May 2025, UK savers have £417 billion held in Cash ISAs, up from £378.7 billion in January.

While having some cash savings can be useful, any money you hold in cash accounts is unlikely to grow at the same rate as investments over the long term.

Research by Money Age found that someone who maxed out a Cash ISA every year since their launch in 1999 could have made around £23,199 in real wealth creation, accounting for inflation and based on average interest.

Meanwhile, if they had invested the same amount of money in FTSE 100 companies over that period, they could have made £157,591.

This means that if you opted solely for Cash ISA savings over the last quarter-century, you would have missed out on over £134,000.

So, prioritising the safety and security of cash accounts can mean you forego the potential for considerably higher returns that could come from long-term investing.

Investments have a better chance of keeping pace with inflation over the long term

Over the long term, inflation is far more likely to erode the value of cash savings than investment returns.

According to This is Money, £10,000 placed in a cash savings account in 1999 would have grown by around 90% to just over £19,000 by 2025, before being adjusted for inflation.

In contrast, if that same £10,000 had been invested in the FTSE All-World Index, it would have grown by more than 650% to over £75,000.

Once inflation is taken into account, the real value of that £19,000 in savings falls to under £5,000, while the investment would be worth around £65,000.

Indeed, research by Schroders found that cash has a roughly 60% chance of beating inflation, whether it’s held for one year or a decade. By comparison, the stock market has about a 70% chance of outperforming inflation over a single year, rising to nearly 90% after a decade, and reaching 100% over 20 years.

So, while cash accounts provide certainty and protection from market volatility, over longer time horizons, investing gives your wealth a far better chance of growing in real terms.

Cash can still play an integral role in your financial plan

Cash savings can still play an important role in maintaining your financial stability and supporting your goals. For example, having easily accessible funds can be very useful for covering unexpected expenses or emergencies.

However, once you’ve built a sufficient cash safety net, it may be worth considering how the rest of your money could work harder through long-term investing.

Of course, all investments carry some level of risk and can fluctuate in value, but as you’ve seen, they also offer a better chance of protecting your real wealth and growth over time.

Get in touch

A financial planner can help you build a portfolio based on your risk tolerance and time horizon. They can help you balance your cash savings and investments to ensure you have enough for the present and to give your wealth the best chance of growing in the future.

To speak to a financial planner, get in touch.

Email info@mlpwealth.co.uk or call us on 020 8296 1799.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.