What has historically returned more — cash or equities?

Over every rolling 10-year period since 1950, UK equities have outperformed cash. The Barclays Equity Gilt Study shows UK equities have returned approximately 5-7% per year above inflation over the long term, while cash has returned roughly 0-1% real. The difference compounds dramatically over decades.

Is it risky to hold shares in an ISA?

Share prices go up and down — that is volatility, not permanent loss. A diversified global equity tracker spreads your money across hundreds of companies and geographies. The ISA wrapper eliminates dividend tax (up to 39.35% for additional rate taxpayers) and capital gains tax, significantly improving after-tax returns versus holding the same investments outside an ISA.

Can I split my ISA allowance between cash and stocks?

Yes. The £20,000 ISA allowance for 2026/27 can be split across any combination of cash ISA, stocks and shares ISA, innovative finance ISA, and Lifetime ISA. You could put £10,000 in each, or any other split. From April 2027, the cash ISA component for under-65s will be capped at £12,000.

At 3.3% Inflation, Your 4.51% Cash ISA Is a 1.2% Real Return — While the FTSE 100 Pays You 3.5% in Dividends Alone Before a Single Share Moves

ByThe Challenger—The comfortable consensus is usually expensive.

DebateRead the opposing take→

Published 16 May 2026·Updated 18 May 2026

A 4.51% cash ISA minus 3.3% CPI inflation leaves just 1.2% real return — wealth preservation, not wealth creation.
The FTSE 100 pays an average dividend yield of 3.48%, with companies like BAT (5.04%) and Shell (3.6%) exceeding cash ISA rates on dividends alone.
Over 20 years, £20,000 compounding at 7% in equities grows to £77,000 tax-free — versus £48,000 nominal (roughly £29,000 real) in cash.
The 2027 cash ISA allowance cut to £12,000 is a policy signal: the government wants money in productive investments, not deposit accounts.
FSCS protects against bank failure, not inflation — the real risk to long-term wealth is inadequate returns, not institutional collapse.

Take the best easy-access cash ISA rate on the market: 4.51% from Trading 212. Now subtract March 2026's CPI inflation of 3.3%. You are left with 1.2% — and that is before you factor in that inflation is rising (it was 3.0% in February), that the Bank of England is cutting rates (3.75% and heading lower), and that your cash ISA rate resets the moment the fixed term ends.

Meanwhile, the FTSE 100 is paying an average dividend yield of 3.48%. British American Tobacco yields 5.04%. Shell yields 3.6%. Rio Tinto yields 3.87%. These are not speculative growth stories — these are mature, cash-generative businesses that write cheques every quarter. And in a stocks and shares ISA, every penny of those dividends is tax-free.

Let me say this plainly: a cash ISA at 4.51% is not protecting your wealth. It is guaranteeing a slow-motion loss of purchasing power every single year. The "safe" option is not safe. It is just quieter about how it hurts you.

Conclusion

I am not arguing that equities are risk-free. They are not. Markets fall. Recessions happen. Dividends get cut. But the risk that people fixate on — short-term price volatility — is not the risk that destroys retirement plans. The risk that destroys retirement plans is inadequate real returns compounded over 30 years.

A cash ISA at 4.51% with CPI at 3.3% and rising gives you, at best, 1.2% real. That is not a return. It is a placeholder. It buys you time while inflation does the real work of eroding your purchasing power.

The stocks and shares ISA, invested in a diversified global equity portfolio, has returned 5-7% real over every meaningful holding period in modern history. It is not speculation. It is not gambling. It is the only asset class that has consistently delivered real wealth creation for ordinary investors.

The FSCS protects your cash from bank failure. It cannot protect you from the guaranteed loss of purchasing power. Only equities can do that. This year's £20,000 ISA allowance deserves better than a slow-motion write-down.

This article is for informational purposes only and does not constitute financial advice. You should seek independent financial advice before making any investment decisions.

Frequently Asked Questions

Sources

ONS — Inflation and Price Indices, March 2026(www.ons.gov.uk)

Bank of England — Official Bank Rate History(www.bankofengland.co.uk)

MoneySavingExpert — Best Cash ISAs, May 2026(www.moneysavingexpert.com)

GOV.UK — Individual Savings Accounts (ISAs)(www.gov.uk)

FCA — Financial Services Compensation Scheme(www.fca.org.uk)

BBC News — UK economy sees surprise growth in March despite Iran war(www.bbc.com)

Cash ISA Guide: Best Cash ISA Rates UK 2026/27 — Easy Access, Fixed and How to Choose the Right Account

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Your Cash ISA at 4.51% Loses You £96,000 Over 20 Years. The Government Cut the Allowance Because It Knows

24 June 2026

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The Government Is Pushing You Into Stocks. Your Cash ISA at 4.51% Is the Last Real Tax Shelter Standing

24 June 2026

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This article is based on publicly available UK economic and financial data. It is for informational purposes only and does not constitute regulated financial advice. GiltEdge is not authorised or regulated by the Financial Conduct Authority (FCA). Past performance is not a reliable indicator of future results. Always consult a qualified financial adviser before making investment or financial planning decisions.