From next year, the Cash ISA allowance will fall to £12,000 for savers under 65, although pensioners keep the full £20,000 limit. The idea is to nudge savers towards Stocks and Shares ISAs instead. That makes sense to me. Here’s why.
Cash is useful for short-term savings you might need in a year or two. But it’s a terrible place to build retirement wealth over decades. Instead of creating wealth, it will be steadily eroded by inflation.
Do stocks work your money harder than savings?
Stock markets may be volatile in the short term, but over longer periods they’ve consistently delivered stronger returns than cash. Figures from Moneyfacts make the case perfectly.
Over the last 10 years, the average Cash ISA returned just 1.79% a year. At that rate, £12,000 would have grown to £14,330 over that decade. Yet inflation was higher over that period, averaging 2.92% over the same period, meaning savers have lost spending power in real terms.
By comparison, the average Stocks and Shares ISA returned 6.79% annually, well above inflation. That would have turned the same £12,000 into £23,147. And if you stretch the timeline further the gap becomes enormous.
Over 30 years, a Cash ISA growing at 1.79% reach £20,433. A Stocks and Shares ISA returning 6.79% would have ballooned to £86,119. That’s why I’d always favour shares for long-term investing.
Are NatWest shares worth considering?
Many investors like the growth and income offered by FTSE 100 dividend stocks. Earlier this month, I bought shares in NatWest Group (LSE: NWG).
Its shares had just dipped after first-quarter results on 1 May, which were slightly poorer than expected, despite profits rising 12% and management increasing guidance for 2026. I saw that temporary dip as a buying opportunity.
NatWest shares are up a pretty impressive 181% over the last five years, although lately the growth has slowed. Over the last 12 months they’ve climbed a more modest 11.5%. Like the rest of the sector, they’ve been hit by the conflict in Iran.
But NatWest isn’t just about the share price. It also boasts a hugely generous dividend. The shares are forecast to yield 6.2% in 2026. That’s expected to hit 6.9% next year.
Despite strong recent performance, the valuation today remains pretty tempting. The forward price-to-earnings ratio stands at just 8.2. Profits have been rolling along nicely too:
- 2025 – £7.7bn
- 2024 – £6.2bn
- 2023 – £5.6bn
- 2022 – £5.1bn
- 2021 – £3.8bn
There are risks, of course. NatWest is tied to the UK economy. If inflation and unemployment keep climbing, borrowing demand could weaken while bad debts may increase. FTSE 100 banks also face political risks. Given those big profits, they would make an easy target for a windfall tax raid.
Even so, I still think NatWest is well worth considering with a long-term view. I’m keeping a close eye on the shares and may well top up my holding if another opportunity presents itself this summer.
Should you invest £5,000 in NatWest Group Plc right now?
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Harvey Jones owns shares in NatWest Group
