Is switching to a stocks and shares ISA safe for savings

5^th January 2026

The editorial unit

The editorial unit

5 January 2026

Cash has long been king in the UK when it comes to Individual Savings Accounts, but the announcement of rule changes due to roll out in April 2027 has introduced uncertainty around the prospect of switching from saving to investing.

In Chancellor Rachel Reeves’ Autumn Budget, it was announced that the annual tax-free allowance for Cash ISAs will be capped at £12,000, down from £20,000, starting in April 2027. Meanwhile, the overall amount that can be saved and or invested across ISAs in a single tax year will remain at £20,000 until at least 2030.

The move was introduced by Reeves in a bid to encourage more UK savers to begin investing, but there already appear to be signs of unease among Cash ISA savers about making the switch to investing. 

According to a YouGov poll conducted during the summer, just 31% of Britons claimed to be willing to invest in a Stocks and Shares ISA, with 65% of respondents suggesting that it’s ‘too risky.’ 

But is this perception of high risk fair? Historically speaking, Stocks and Shares ISAs have been a reliable investment product for consistently higher returns. 

Data from 2023/24 shows the market value of Stocks and Shares ISAs stood at £511 billion, while Cash ISAs were valued at £360 billion. This is despite there being only 4.09 million Stocks and Shares ISAs being deposited into in that tax year, compared to nearly 10 million Cash ISA accounts.

How stocks and shares ISAs differ from cash

There are some key differences between the Cash ISA and Stocks and Shares ISA that are worth keeping in mind. 

According to a recent survey, 17% of UK adults have claimed to have ‘never heard’ of a Stocks and Shares ISA, while just 25% of those who have heard of it know nothing about it. Because of this, it’s understandable that Britons are a little wary about making a prospective shift from saving to investing. 

While Cash ISAs are a tax-efficient tool for saving money at fixed rates, Stocks and Shares ISAs offer tax-free access to investing and can be used for different kinds of investments, including access to stocks and shares, investment funds, ETFs, bonds, investment trusts, and unit trusts. 

Because all profits within a Stocks and Shares ISA are entirely tax-free, it can open the door to compounded earnings, whereby people can use the money they make to reinvest in more equities to roll their profits over each year. 

Crucially, the tax-free status of ISAs also means that it’s possible to invest in dividend-paying stocks without having to be liable for dividend tax. 

Are stocks and shares ISAs safe? 

Are there any guarantees that Stocks and Shares ISAs will deliver better earnings than Cash ISAs? No. 

Investments tend to rise and fall in market value on a daily basis, meaning it is entirely possible for a withdrawal to take place on a day when markets are in decline. However, the general aim of investing is to allow time for these fluctuations to smooth out, with the expectation that the overall value trends upwards over the longer term, outperforming savings interest rates and inflation.

To help add some context to the long-term performance of ISAs, Unbiased data has found that the average return on Stocks and Shares ISAs annually over the past 10 years stands at 6.79%. Over the same period, Cash ISAs have returned just 1.79% in comparison. 

In more recent years, the returns of Stocks and Shares ISAs have been even stronger, and in the year to November 2025, the average return on a Stocks and Shares ISA has been 15.19%, compared to 3.77% for the average Cash ISA. 

With this in mind, making the switch from saving to investing can open the door to stronger portfolio growth, but the speculative nature of equities means that there’s certainly a higher level of risk attached to those looking to make the switch from a Cash ISA to a Stocks and Shares ISA. 

Finding a balance

One of the biggest advantages of switching from saving to investing through a Stocks and Shares ISA is the flexibility to invest in equities that match a chosen risk appetite. There are also products on the market that offer managed portfolios, where an investment team oversees decisions on behalf of investors.

Opening a Stocks and Shares ISA does not have to involve buying into speculative technology stocks. A more balanced approach can be achieved by selecting established dividend-paying stocks that are more closely aligned with longer-term financial objectives.

As with any form of investing, it is advisable to carry out thorough research before opening a Stocks and Shares ISA. Where there is uncertainty around strategy, seeking advice from a qualified financial adviser may be appropriate.

The editorial unit