Stocks and shares ISA returns beat cash ISAs over past year

The average stocks and shares ISA performed much better in the year to February 2025 than over the previous year.

With a maximum of £20,000 available to deposit into ISAs each tax-year, savers will be keen to put their money in accounts that offer the greatest return.

And, based on the average performance from 1 February 2024 to 1 February 2025, stocks and shares ISAs provided a significantly higher return than cash ISAs, according to analysis by Moneyfactscompare.co.uk.

This is despite ISAs and other savings accounts paying much higher interest rates in recent years than they have done previously.

While the average cash ISA rate was a decent 3.80%, which was slightly higher than the previous year, the average stocks and shares ISA saw a much larger 11.86% growth.

By contrast, in the year leading up to 1 February 2024, stocks and shares ISAs saw a return of just 2.80%, compared to the average cash ISA rate of 3.76%.

Average cash ISA rate is the average of each 1st of month figure over the period shown, includes fixed and variable ISA rates. All stocks & shares ISA data based on Lipper IM Primary funds. Source: Moneyfactscompare.co.uk / Lipper IM

Which funds performed best?

Based on analysis of Lipper IM Primary funds, Financial and Financial Innovations was the stocks and shares ISA fund that performed best, offering returns of 34.74% over one year.

Other funds that saw significant growth were North America (24.42%), Japan (10.08%) and UK Equity Income (14.50%).

By contrast, the worst-performing fund (Latin America) fell in value by 11.15%.

However, fund performance can fluctuate from year to year so, if you invest in a stocks and shares ISA, it’s crucial to regularly review your investment pot and its performance.

“Sectors that return growth one year can fail to perform another; indeed, between 2023 and 2024, the China/Greater China sector fell by more than 30%, but over the past 12 months it returned growth of over 20%,” noted Rachel Springall, Finance Expert at Moneyfactscompare.co.uk.

Is a stocks and shares ISA worth it?

With the average stocks and shares ISA offering such an attractive return over the previous 12 months, savers may be more tempted to deposit some of their ISA allowance into these accounts, instead of a standard cash ISA.

“Those now considering a stocks & shares ISA would be wise to keep in mind that past performance is never guaranteed to be reflected in future returns. Indeed, the significant rise in stock markets over the last year may not be sustained and could fall back,” Springall cautioned.

“It is worth pointing out that cash ISAs previously outpaced stocks & shares ISA growth for two consecutive years overall, amid stock market turmoil,” she added.

As with any form of investment, stocks and shares ISAs are more suitable for those who want to invest in the long-term, as this can give your money more time to recover from any market volatility and grow in value.

Many experts typically recommend you invest for a minimum of five years in a stocks and shares ISA; if you want to save over a shorter period, a cash ISA may be more appropriate.

For help with an existing stocks and shares ISA, or to get some extra guidance before dipping your toe into investing, it may be worth seeking professional advice.

Because there is always the risk that you could get back less money than you put in with a stocks and shares ISA, those less willing to take that chance may favour a cash ISA instead.