Adrian Murphy

Scotland, and the UK for that matter, is a nation of cash savers. More than £2 trillion is estimated to be stored away in bank accounts, which is testament to the ability of millions of people across the country to diligently keep their spending in check.

A good savings buffer is undoubtedly a positive thing. But, so much of the country’s wealth being held in cash is also a problem – particularly when it’s combined with the fact that the UK has the lowest rate of equity ownership (outside of pensions) in the G7, according to a report last year.

It’s a huge missed opportunity. There is an abundance of research that makes it explicitly clear that investing in stocks and shares has delivered far superior returns over the vast majority of timeframes. Over 10 years, £20,000 invested could have turned into £52,200, or just £22,546 in cash, using average returns from ISAs in the last decade.

In fact, figures we obtained through freedom of information (FoI) from HMRC found that 94% of the nearly 5,000 people who had £1 million or more in their ISAs were stocks and shares accounts, with the remainder a mixture of stocks and shares and cash. In other words, you have virtually no chance of reaching that figure through cash savings alone.

Yet, the latest available data suggests savers are committed to cash. There were 15 million Adult ISA accounts during the 2023/24 tax year – up from 12.4 million in 2022/23 – and the vast majority of the new subscriptions, 2.1 million, were cash. By comparison, just 283,000 were stocks and shares and around 70% of the money placed in ISAs was kept in cash.

But when it comes to saving for the next generation, the situation is almost reversed. A total of £1.8 billion was subscribed to Junior ISAs in 2023/2024, and only around 36% of that was cash with the remainder invested in stocks and shares. The contrast is even starker when it comes to maximised accounts – data we obtained from HMRC about accounts that received the full £9,000 junior ISA allowance found 80% were invested in stocks and shares. And some of those are holding fortunes of around £400,000 - eight times the average student debt on graduation.

It makes for an interesting juxtaposition – why is there such a big difference in the way people save for themselves and how they save for their kids or grandkids? Many people will say it’s all about the timeframe – saving for children means you have plenty of time to watch their money ride the ups and downs of stock markets. While that is true, savers in their 20s, 30s, and 40s will also likely have decades before they retire and can do the same.

However, in all likelihood, the money built up in junior ISAs will be used sooner than people with decades until retirement. The child you’re saving for will have access to their junior ISA account from the age of 18 and may well decide to spend that money on going to university, getting on the property ladder, buying a car, or funding any of the other big life events that tend to come up around that age.

With a new tax year upon us, whatever way you look at it far too much of the money being subscribed to adult ISA accounts is held in cash. While the government is already pushing in that direction, it’s up to every individual to manage their own money – and, if the data we’ve uncovered is anything to go by, they would benefit from treating it the way they are saving for their kids.

Adrian Murphy is CEO of Murphy Wealth