Cash ISA savers are marking an unhappy anniversary this month as seven years of 0.5% base rates condemn them to average annual returns of just 1%, analysis from retirement savings experts MetLife shows.
The analysis of average annual cash ISA rates shows an average cash ISA saver has received just 6.8% in interest since March 5th 2009 when the Bank of England Monetary Policy Committee cut rates to 0.5%.
There is little consolation from current low inflation – in four of the past seven years cash ISA savers have even lost money in real terms as the rate they receive from their ISA is less than the rate of inflation.
MetLife's analysis shows someone making regular investments in the average cash ISA would have put away £24,911 since March 2009 and seen it grow to £26,272 for a gain of £1,729 – growth of 6.8% before inflation.
Annual average cash ISA rates have never been higher than 2.8% and have been as low as 1.4% while annual average inflation has been as high as 4.48% and as low as 0.04%. In 2010, 2011, 2012 and 2013 average inflation was higher than average cash ISA rates.
Simon Massey, Wealth Management Director, MetLife UK said:
"Cash ISA savers have suffered for seven years and are not guaranteed an improvement any time soon.
"It is understandable that many are wary of investing in the stock market with the risk of losing money but the unfortunate reality is that many are already losing out after inflation.
"With more than £61 billion invested in cash ISAs last year it is clear that savers and their advisers need to look at alternatives to ensure their money delivers more competitive returns."
The table below shows average cash ISA rates and inflation and the real return:
MetLife's ISA Portfolio is an innovative stocks and shares ISA offering MetLife's innovative income and capital guarantees with unique daily lock-ins. Savers can invest in the Secure Income Option from age 50 and take a guaranteed income for life from age 55.
Customers using the capital guarantee are protected against market falls and have the certainty of a guaranteed amount at the end of their chosen term. Both guarantee options provide the potential for growth and locks in any investment growth above the existing guarantee base daily. Global powerhouses BlackRock and Fidelity Worldwide Investment provide the investment expertise for the funds.
Investors can apply online through their adviser. Guarantee charges start from 0.6% on the Secure Income Option and 0.3% on the Secure Capital Option. MetLife's Active Asset Allocation has a total expense ratio of 0.55%. Initial minimum investments in the Guaranteed ISA are £15,000. The annual management charge for the ISA Portfolio ranges from 0.7% to 0.4% depending on the value of the investment.