Cash ISA accounts outnumber shares three to one
- But in the long-run share investments outperform cash, Virgin Money says
Cash ISA accounts are being opened at the rate of three to one against equity ISAs as savers are scared off by stock market volatility in the run up to the end of the tax year according to analysis* from Virgin Money.
More than 7.38 million cash ISAs have been opened this tax year compared with 2.49 million mini and maxi equity ISA accounts, Virgin’s analysis shows. And even though savers can put more money into equity ISAs, around 2.5 times more is being invested in mini cash ISAs compared with equity equivalents.
But Virgin Money is warning investors that discounting equities now could mean losing out in the long run. Its figures show that shares on average outperform cash investments over a three or five year period.
The Virgin Money analysis** shows that while the FTSE All Share Index was down 6.16 per cent in the year to 10th March 2008, over the past three years it is up 28.06 per cent and over five years it has increased by 94.31 per cent.
However leading savings rates over the same period have delivered less significant returns. Virgin Money figures show that over the same periods cash performs well in the first year but in the long term performs less impressively. In the year to 10 March cash investors could expect a 5.71 per cent return, over three years 15.80 per cent and over five years 25.35 per cent.
Virgin Money spokesman Scott Mowbray said: “The poor performance by stocks and shares in the past twelve months has inevitably pushed investors towards cash ISAs. But if you took that view five years ago you’d be kicking yourself now as shares have consistently performed well compared to cash.”
Chancellor Alistair Darling confirmed in last week’s Budget that ISA rules will change from 6 April 2008 to allow maximum investments of up to £7,200 in a tax year compared with £7,000 now. The cash ISA limit will rise to £3,600 from £3,000.
And crucially investors with money in cash ISAs will be allowed to convert them into shares ISAs without affecting their tax-free limit. Around £22.6 billion was invested in cash ISAs during the 2006/07 tax year, Virgin Money says.
Scott Mowbray added: “Investment Management Association figures show investors have been cashing in unit trusts with net outflows in January, December and November.
“But going for the safety of cash is potentially risky if it means missing out on long-term gains. All the evidence is that shares provide stronger returns in the long-run than cash.’
- Ends -
Notes to editors:
* Virgin Money analysis of HMRC data.
** FTSE All Share performance
- over one year (01/03/2007 - 10/03/2008): down 6.16%
- over three years (01/03/2008 - 10/03/2008): up 28.06%
- over five years (03/03/2003 - 10/03/2008): up 94.31%
Bank of England base rate performance:
- over one year (01/03/2007 - 10/03/2008): up 5.71%
- over three years (01/03/2008 - 10/03/2008): up 15.80%
- over five years (03/03/2003 - 10/03/2008): up 25.35%.
For further information
Scott Mowbray at the Virgin Money Press Office
Scott.mowbray@virginmoney.com - 01603 215909
Kevan Reilly/Billy Partridge/Holly Clark, Citigate Dewe Rogerson
Firstname.lastname@citigatedr.co.uk - 0207 638 9571
About Virgin Money
Virgin Money is Virgin’s financial services arm and was established in 1995.
Virgin Money has over two million customers and offers a wide range of financial products across lending (e.g. credit cards and personal loans), savings (e.g. deposits, investments and pensions) and protection (e.g. life insurance, home insurance and car insurance) to the UK market.
The Virgin Stakeholder Pension, Virgin Unit Trust and Virgin PEP are provided by Virgin Money Unit Trust Managers Ltd which is authorised and regulated by the Financial Services Authority. Registered office: Discovery House, Whiting Road, Norwich, NR4 6EJ. Registered in England no. 3000482. Entered on the Financial Services Authority’s Register (www.fsa.gov.uk/register/), Register Number: 171748.
About the Virgin UK Index Tracker
Our FTSE All-Share Tracker Fund invests in the long-term potential of the whole stock market.
While past performance can never guarantee the future, shares have consistently outperformed most other investments over the last century, which is why they remain the No1 choice for professional investors. Our tracker fund buys shares in every company listed on the FTSE All-Share Index, so it’s an investment that keeps track with the market every step of the way. Even in poor stock market periods, share dividends can mean your investment is still growing.
About the Virgin Climate Change Fund
The Virgin Climate Change Fund, launched in January, aims to achieve high performance by investing in companies with a lighter than average environmental footprint. Holdings include stocks such as BG Group, Xstrata and Renault.
The Virgin fund’s advisor GLG Partners LP (“GLG”) only invests in companies with lighter than average environmental footprints in their sectors as well as companies who provide, manufacture or own solutions to environmental problems.
Data provided by leading environmental research organisation Trucost is combined with GLG’s own company research to select suitable stocks for investment. GLG have successfully managed a similar fund for institutions and high net worth individuals since March 2007 known as the 'GLG Environment Fund' which to date has outperformed the MSCI Europe Index.
About GLG Partners LP
GLG, is authorised and regulated by the UK Financial Services Authority and is one of the largest independent alternative asset managers in Europe. It offers its base of long-standing prestigious clients a diverse range of investment products and account management services. GLG’s focus is on preserving client’s capital and achieving consistent, superior absolute returns with low volatility and low correlations to both the equity and fixed income markets. Since its inception in 1995, GLG has built on the roots of its founders in the private wealth management industry to develop into one of Europe’s largest and most recognized alternative investment managers, while maintaining its tradition of client-focused product development and customer service. As of December 31st 2007, GLG managed gross assets under management of over $29 billion.
For further information please visit: www.glgpartners.com
About Trucost
Trucost is an environmental research company, which enables companies and investors to understand the environmental impacts of business activities in quantitative and financial terms. Trucost provides data, analysis and advice for institutional investors, corporations and government and has standardised comparable data on over 4,000 companies globally. Trucost wrote the environmental reporting guidelines for the UK Government published in 2006. Further information on Trucost is available from www.trucost.com
