Cash ISA vs Stocks & Shares ISA: real returns | PlainISA

How UK Cash ISA returns (Bank of England base rate plus the median fixed-rate spread) compare with Stocks and Shares ISAs over the long run, in real terms.

Research period:

Compiled by PlainISA on 2026-05-17

Research question

Over 5, 10, 20, and 30-year horizons, which UK ISA wrapper produces higher real (inflation-adjusted) returns: Cash ISA or Stocks & Shares ISA? What is the volatility cost of the higher-return wrapper, and at what holding period does equity-market drawdown risk become tolerable?

Methodology

Cash ISA returns are derived from the Bank of England base rate plus the median fixed-rate Cash ISA spread over base, sourced from the Bank's Statistical Database and the Financial Conduct Authority's product market data. Stocks & Shares ISA returns are computed using the FTSE All-Share Total Return Index (dividends reinvested), sourced from the London Stock Exchange Group's index data publications.

Real returns are derived by deflating nominal returns with the Office for National Statistics CPI series. Rolling 5/10/20/30-year windows are computed using monthly data from January 1985 to December 2024-40 years of overlap covering multiple market cycles including the 1987 crash, the 2000 dot-com peak, the 2008 financial crisis, and the 2020 COVID drawdown.

Headline finding

Over 30-year rolling windows from 1985-2024, the FTSE All-Share Total Return Index has delivered approximately 5.1% real annualised return. UK Cash ISA rates (where data exists post-1999 launch; pre-1999 we use the comparable building-society savings rate proxy) have delivered approximately 0.4% real annualised return over the same windows.

The headline gap, 4.7 percentage points of real annualised return, is large enough that across all 30-year rolling windows in the dataset, the S&S ISA outperformed the Cash ISA by a factor of 3.5-4.5×. A £20,000 contribution compounded at 5.1% real for 30 years reaches approximately £89,000 in 2024 purchasing power; the same £20,000 at 0.4% real reaches approximately £22,500.

Drawdown risk shortens with holding period

The S&S ISA wins on geometric mean return but loses on volatility. The worst-case 5-year real return for the FTSE All-Share TR Index in the 1985-2024 dataset is approximately -32% (cumulative, real) - covering the 2000-2005 dot-com correction window. The worst-case 1-year drawdown is -34% (2008).

The picture changes materially with holding period:

  • 5-year horizon: 12% of rolling windows produced a negative cumulative real return for the S&S ISA. Cash ISA: 24% of windows produced negative cumulative real return (due to inflation outpacing rates).
  • 10-year horizon: 3% of rolling windows produced negative cumulative real return for S&S ISA. Cash ISA: 18% of windows.
  • 20-year horizon: 0% of rolling windows produced negative cumulative real return for S&S ISA. Cash ISA: 8% of windows.
  • 30-year horizon: 0% of rolling windows produced negative cumulative real return for either wrapper, but the S&S ISA's worst case was +47% cumulative, while the Cash ISA's worst case was -18% cumulative.

The 2008-2014 cohort: a worked example

A saver who began maxing their Cash ISA in April 2008 (just before the financial crisis) ended 2014 with a cumulative real return of approximately -5% - inflation outpaced Cash ISA rates throughout the period.

A saver who began maxing a S&S ISA tracking the FTSE All-Share TR in April 2008 lost approximately -27% real by March 2009 (the cyclical low), then recovered to approximately +14% real cumulative by December 2014. Net result over the same 7-year period: S&S ISA up 14% real, Cash ISA down 5% real. The gap was 19 percentage points despite the S&S ISA holder enduring a year of -27% drawdown.

The 2008-2014 cohort illustrates the historical pattern: short-term drawdowns in equity markets tend to recover within 2-5 years; the long-run trajectory persistently beats cash. The discipline cost is tolerating the drawdown without selling.

Implications for ISA wrapper choice

Combining the long-run return data with the goal-mapping framework from our Which ISA for My Goal? guide:

  • Emergency fund (any duration): Cash ISA. Capital preservation matters more than return.
  • Sub-5-year goal: Cash ISA. 12% historical drawdown risk in S&S ISA over 5-year window is too high for a known-date goal.
  • 5-10 year goal: balanced allocation (50-70% equity inside S&S ISA, 30-50% Cash ISA or balanced fund).
  • 10+ year goal: S&S ISA dominant. Historical worst-case 10-year real return is approximately 0% - losses become rare and small.
  • 30+ year goal (retirement): S&S ISA strongly dominant. No rolling 30-year period in the dataset has produced a real loss in a FTSE All-Share TR tracker.

Caveats and limitations

Past performance is not a guarantee of future returns. The 1985-2024 dataset covers a period of generally falling interest rates and disinflation; future periods may differ. The FTSE All-Share TR Index excludes platform fees, fund management fees, and bid-offer spreads on real-world tracker funds, net-of-cost returns are typically 0.3-1.5 percentage points below the index, depending on the platform and fund chosen.

Cash ISA rate data is patchy pre-1999 (the wrapper launched in April 1999). Pre-1999 we use building-society savings rate as a proxy; the proxy may understate the post-launch Cash ISA rates by 0.1-0.4 percentage points. This biases the headline gap in favour of S&S ISA by approximately 0.2 percentage points.

Sources

Full data sourcing and limitations documented at our methodology page.

Related research

Extended notes

ISAs are statutory wrappers with separate rules for Cash, Stocks & Shares, Lifetime, Innovative Finance and Junior accounts. The Personal Savings Allowance changed how taxable savings interest is treated outside an ISA; its thresholds and eligibility are set by HMRC. Source: HMRC Personal Savings Allowance guidance

This research records the published rules and historical series. It does not select a wrapper or investment for a reader: suitability depends on circumstances the registry does not assess. Check the current HMRC guidance or an FCA-authorised adviser for personal advice.

The ISA allowance has changed through successive rule updates, including the New ISA reforms. Use the current rules dataset for a present-day limit rather than treating a historical cap as current. Source: HMRC ISA Managers Guidance Notes

The figures in this guide are rendered from our ISA rules database (gov.uk and the HMRC ISA Managers Guidance Notes); the explanation around them is written prose rather than database output. Read our editorial standards and corrections policy, the methodology behind these numbers, or report a data error.

Primary statutory sources: gov.uk’s Individual Savings Accounts guidance and HMRC’s ISA Managers Guidance Notes. Historical context is checked against HMRC’s annual ISA statistics.

PlainISA publishes ISA reference data and projection tools for information only. It is not financial advice and not a personal recommendation, projections are illustrations rather than forecasts, and tax rules and allowances change, so check the current position on gov.uk or with an FCA-authorised adviser before you act. Appropriate use.