£115bn sat in cash ISAs could be losing value

Around £115bn is currently sitting in cash ISAs where the rate of return is unknown, according to new research from Quilter.

The wealth management firm revealed that the billions sat in cash ISAs could be losing value, but the 6.7 million adults holding the cash may be unaware.

Quilter found there is £270bn currently sitting in all cash ISAs in the UK, although the research, based on responses from 2,005 UK adults, found that 43% don’t know the rate on their cash ISA.

Asked if they were aware of the interest rate they received, 35% of cash ISA holders said they didn’t know while a further 8% said they had never checked, meaning just 57% of respondents said they knew what the account paid.

Even more cash is likely to have been parked in ISAs in recent months, Quilter added, as household savings have increased “dramatically” due to lower spending, and as people have set more money aside due to fears about the economy.

“This is a cash crisis,” commented Quilter Private Client Advisers chartered financial planner, Rosie Hooper.

“We estimate that over £100bn is held in cash ISAs where the holder doesn’t know the rate of return. Many people will be losing money in real terms, because their bank pays less than the rate of inflation.”

Hooper also suggested the problem is being “exacerbated” by the impact of the coronavirus pandemic.

“Many people save in cash because the prospect of stocks and shares can seem overwhelming or they are don’t know how much they can actually afford to invest,” she added. “A good rule of thumb is to save the equivalent of six months of your salary in cash and you can then invest in a spread of different assets that can deliver a long-term return.

“For some people, financial advice is crucial so they can create a financial plan, factor in potential changes in circumstances and then allocate money accordingly.”

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