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Stocks and Shares ISAs outperform Cash


Research has revealed that investors with a ‘Stocks and Shares ISA’ (Individual Savings Account) have benefitted from much more growth in their savings than those with ‘Cash ISA’ in recent years.

According to Moneyfacts, the average growth of a Stocks and Shares ISA in the 2013/14 tax year was 9.42%, with some investments performing even better. For example, the best performing Stocks and Shares ISA yielded a 50% return in the last tax year.

On average, a £10,000 investment would have earned £942 in the 2013/14 tax year before admin fees were taken into account, all of which would be sheltered from the tax man.

However, those who invested into a Cash ISA would have achieved much less return on their investment. This is because the average Cash ISA yielded a 1.69% return in the 2013/14 tax year.

In this example a £10,000 investment would have earned around £169 over 12 months. Much less than if invested into a Stocks and Shares ISA.

Stocks and Shares ISAs to become more popular

As Stocks and Shares ISAs have proved to yield much greater returns in recent years, it is likely that their popularity will increase significantly.

Richard Ealing, Head of Pensions and Investments at Moneyfacts, said: "With signs of economic recovery and no significant improvement in Cash ISA rates, we would expect to see the popularity of Stocks and Shares ISAs increase further this tax year."

Currently an individual can invest up to £11,880 per year into a Stocks and Shares ISA, but only £5,940 into a Cash ISA (as long as the combined investment doesn’t go over £11,880).

However, these rules will be relaxed on July 1st 2014 when investors will be able to invest up to £15,000 into each type of ISA.

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