Budget boost to cash savings should not blind people to better returns elsewhere


The Chancellor in his budget delivered a boost for those saving in bank or building society accounts by scrapping tax on the first £1,000 of interest (£500 interest for higher rate tax-payers). This means someone can save £100,000 in a cash account without paying tax on their interest, assuming an interest rate of 1%. They can then save £15,000 in cash via an ISA each year and the Chancellor also introduced new flexibilities there, enabling savers to take money out and put it back in.

This may make cash holdings more attractive, but savers need to carefully consider whether this sweetener is enough to compensate for the potential higher returns available from stock market investments (stocks and shares ISAs).

Performance data over the last 5 years shows all IA (The Investment Association, previously IMA) sectors (excluding cash sectors*) have outperformed cash (using the Libor 3m rate). The difference between the top performing IA sector and cash is quite startling, and brings into sharp focus the greater potential stock market investment can offer compared to holding cash.

For many savers, the thought of investing in the stock market is too daunting, with too many risks, and they prefer the security of investing in cash. However, is the security of cash really worth it, especially in today’s low interest environment? There is no doubt that building a robust and successful portfolio takes research, diligence, focus and time. Delegating the investment process to a professional can help ensure a sound investment process is followed and all pitfalls safely navigated.


Rachael Griffin, financial planning expert, Old Mutual Wealth:

“The scrapping of income tax on interest is a positive move, and will please many savers. However, with interest rates at an all-time low, people should not be blind to the potential of better returns elsewhere. Whilst past performance is not a guide to future performance, the fact that all IA sectors have performed better than cash should make people question the opportunity cost of holding cash.”


* Excludes Money Market and Short Term Money Market IA sectors which delivered 1.23% return and 0.71% return respectively.

Please note, past performance is no guide to future performance. 105% return over 5 years does not reflect ‘normal’ growth projections; this exceptional growth reflects the recent stock market rally in both equities and bonds. 

For more information please contact

Sophie LentonOld Mutual Wealth02380 916 77007834 499 558

Notes to Editors:

Old Mutual Wealth is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.

Old Mutual Wealth oversees £131.3 billion in customer investments (as at 30 September 2017).

It has an adviser and customer offering spanning: Financial advice; investment platforms; multi-asset and single strategy investment solutions; and discretionary fund management.

The business is comprised of two segments: Wealth Platforms and Advice and Wealth Management.

Wealth Platforms includes the Old Mutual Wealth UK Platform; Old Mutual International, including AAM Advisory in Singapore; and the Old Mutual Wealth Heritage life assurance business.

Advice and Wealth Management encompasses the financial planning network, Intrinsic; Old Mutual Wealth Private Client Advisers; discretionary fund management business, Quilter Cheviot; and Old Mutual Wealth’s multi-asset investment solutions business.

Old Mutual Global Investors (‘OMGI’) is the asset management business of Old Mutual Wealth with £39.8bn funds under management (as at 30 September 2017). On the 19th December 2017, Old Mutual Wealth announced that it has agreed to sell its Single Strategy asset management business to the Single Strategy Management team and funds managed by TA Associates. The proposed transaction is subject to customary closing conditions, including regulatory approvals. 

Following managed separation from Old Mutual plc, Old Mutual Wealth will rebrand to Quilter plc. Each of the businesses within the Quilter Plc group will be rebranded over a two-year period, with the exception of Quilter Cheviot, which will retain its existing name.

Old Mutual Wealth is part of Old Mutual plc, a FTSE 100 group that provides life assurance, asset management, banking and general insurance. Old Mutual is trusted by more than 19.4 million (as at 31 December 2016) customers across the world and has a total of £212.3 billion of assets under management (as at 30 June 2017).


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