Cash ISAs remain extremely popular in the UK today. A little too popular for the government’s liking it seems, as it has just set out some of the biggest overhauls to the ISA regime in decades.
The idea is to encourage more savers to invest in the stock market, which over longer periods of time wipes the floor with cash in terms of returns. Indeed, cash rarely even beats inflation, meaning savers lose real purchasing power.
But which is winning so far this year — cash or stocks? Let’s find out.
Cash
To start, I should make clear that I’m certainly not against Cash ISAs. As an investor, you don’t want to be forced to sell quality stocks to pay for a new car or unexpected tax bill. A cash buffer can certainly provide peace of mind.
Average Cash ISA interest rates throughout 2026 have generally been between 3.5% and 4.5%. Based on this then, £10,000 put into one at the start of 2026 would have generated somewhere between £175 and £225 in interest so far, depending on the type of account you chose.
By the end of the year, that £10k should have generated a total of roughly £350 to £450 in completely tax-free interest. That would be an okay result, albeit inflation is expected to average around 3% this year, according to the Bank of England.
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Shares
What about the stock market? How has that fared in comparison?
Well, it depends on how you define the stock market, but below are three popular blue-chip indexes and how they’ve performed year to date.
| Return | |
| Nasdaq-100 | 17.9% |
| S&P 500 | 8.7% |
| FTSE 100 | 6.1% |
As we can see, all three have beaten cash so far, particularly the Nasdaq-100. A £10,000 investment made in this tech-heavy index at the start of the year would now be worth around £11,800.
But none of these returns include dividends. Adding income to the mix, the Footsie’s year-to-date return rises above 7.5%, thereby also comfortably beating cash.
An ETF idea
Of course, nobody knows what the rest of the year will bring. The stock market could well end up pulling back sharply, especially the US indexes, which are currently trading very expensively.
But zooming in on the FTSE 100, is this worth considering for a Stocks and Shares ISA? I think so, especially if the fund is an accumulating one in the shape of something like iShares Core FTSE 100 ETF (LSE:CUKX).
In other words, the dividends are accumulated/reinvested back into the fund, helping fuel the compounding process. The FTSE 100’s starting yield today is around 3.05%.
Top holdings mirror the UK’s largest listed firms, including HSBC, AstraZeneca, Shell, Unilever, and engine maker Rolls-Royce. What I like here is that each represents a different part of the global economy — banking, pharmaceuticals, oil and gas, household goods, and aerospace and defence, respectively.
For me, this diversification is attractive. If there is an AI bubble and it pops, I would expect such names to hold up better than many tech shares.
That said, it’s worth mentioning that almost 28% of the fund is in the financials sector. So a global economic downturn at some point could impact performance and dividend reliability.
Despite this risk, I prefer the FTSE 100 over cash long term, making the index one to consider allocating some money to.
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Ben McPoland owns shares in AstraZeneca, HSBC, and Rolls-Royce.
