How investing has outperformed cash by £56,059 over the long term

Think you need millions to invest? Here’s why investing is for everyone

When ISAs first launched back in 1999, few of us could have guessed quite how big the gap would grow between keeping money in cash and investing it. But numbers we've crunched show that the difference is now huge – and it’s a handy reminder to look at the amount of cash you're holding. 

We looked back at how your money would have fared if you’d kept it in cash since ISAs launched in 1999, compared to if you’d put the money in various different investment markets. We’ve also looked at what inflation has done over that time – that's the amount prices have risen during the period, and works as your base level of what you at least want your money to keep up with over time.  

What £1,000 in 1999 looks like today 

Let’s start simple. If in 1999 you’d put a one-off amount of £1,000 into a fund that invests in the US, and got the average performance of all the funds investing in US companies, it would now be worth £6,285. Not bad for a £1,000 investment. But if you had made that same, one-off £1,000 investment in 1999 and left it in a cash ISA, earning the average interest rate over that whole period, you’d have £2,079. So, a third of the sum of money than if you’d invested it.

And what about that inflation figure I mentioned? Well over that time you’d have needed your £1,000 to turn into £1,937 just to keep up with rising prices. So cash has beaten that mark – but only just.

However, US markets have done very well in that time period, so let’s look at some other investment options for comparison. Even UK-focused investments, which have had a tough couple of decades, would have turned that £1,000 into £3,787 – still well ahead of cash and comfortably ahead of inflation. And putting that same £1,000 in a fund that invests in global companies would have got you £5,158.

The picture only gets starker if you saved regularly. We looked at the example of someone who put £1,000 into ISAs every April since 1999, to see how they would have fared. If that money had gone into funds investing in the US, it would have turned into a whopping £127,887. Even if it was invested in global funds, you’d be sitting on a pot worth £92,349 today, and if it had been put into UK markets it would have turned into £67,866.

And how about cash? Well you’d have £36,290 in your savings pot today - a total of £56,059 less than if you’d invested the money globally. And just to keep pace with inflation you’d have needed to generate £40,717, meaning that cash savers have actually lost spending power over the long run.

This is the power of compounding: steady contributions, left alone, growing year after year. Markets won’t necessarily rise every year, of course, but history shows they rise more often than they fall – and over long periods they typically outperform cash.

Shorter-term returns

But that is looking at a very long time period, what about a shorter period that’s maybe more realistic for those starting out today. Even over the past year, investing pulled ahead. Interest rates have been higher in the past few years, meaning that some people may assume that cash has the edge. But over the past year, that hasn’t been the case.

We looked at the example of someone who had the full £20,000 ISA allowance to spare, and compared the same cash vs investing story. A £20,000 lump sum invested in October 2024 would now be worth £22,612 if it had been put in a US fund, £22,344 if it was invested in global funds and £21,923 if it was put in UK equities.

In comparison, if it had been left in a Cash ISA, that same money would be £20,698 – slightly below inflation, meaning your money has effectively gone backwards in real terms*.

What do we do about cash?

Holding cash feels comfortable and risk free: you can see what's in your account, the value doesn’t move around, and your money won’t fall in value. But inflation is a huge factor that many savers overlook, as the figures above show, and over time it quietly eats away at your savings.

Of course, the figures we’ve looked at are averages. Savers who shopped around for the best Cash ISA rates would have done better. But equally, investors picking the best funds would have made far more. And those who stuck with poor-performing funds or very low-rate accounts would have done far worse. But the broad pattern is clear: investing rewards patience, and cash rarely wins over the long run.

But that doesn't mean everyone should ditch cash. It still has a very important role, for any money you know you’ll need in the short term, for money in your emergency pot that you may need immediate access to and any money you don’t want to take any risk with.

But staying entirely in cash for years on end – simply because it feels safe – can mean missing out on significant growth. When it comes to choosing between a Cash ISA and a Stocks and shares ISA, the key question is: are you saving for the short term or the long term? If you’re looking at medium to long-term goals, such as saving for retirement alongside a pension, for a house deposit, home improvements in future or a career break, then a Stocks and shares ISA could be a more effective route, given that markets tend to rise over time and outperform cash, despite short-term fluctuations.

* Source: AJ Bell/Bank of England/FE. Data from 1 October 2024 to 30 September 2025 - based on £20,000 investment at start of period and no further contributions. Investment figures show average performance of sector including fund charges; inflation is based on CPI measure; cash ISA returns based on average interest rate available.