A decade ago, I took a bold step that aligns with what Rachel Reeves is now urging savers to consider: transferring my tax-free savings from cash into the stock market. It was a daunting decision back then, but one that many might face soon.

Recently, the Chancellor unveiled a Budget plan that will affect cash Isa savers. Starting in April 2027, for those under 65, the maximum annual allowance that can be held in cash will decrease from £20,000 to £12,000.

Savers who wish to utilize the full tax-free Isa allowance will need to allocate the remaining £8,000 into a stocks and shares Isa. This shift aims to encourage investment in the UK stock market.

While Reeves promotes this move as a way to bolster investment, the proposal has sparked debate. The volatility of the stock market is a significant concern for those who prefer the stability and security of cash savings. For some, cash will remain the preferred choice.

Reflecting on my personal experience, I remember feeling apprehensive as I ventured into investing in stocks and shares for the first time. Despite my background in personal finance journalism, it was uncharted territory for me.

I was very nervous when I first dipped my toe into the stock market waters. Despite working as a personal finance journalist, I had never invested into a stocks and shares Isa.

I had written too many risk warnings about ‘investments can go down as well as up’, ‘capital at risk’ and ‘don’t invest money you cannot afford to lose’. I never felt I had money I could afford to lose.

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But I was fed up with the rubbish savings interest return on the £28,600 odd I had built up in my cash Isa and was determined to do better.

At 44, the retirement I was saving for was a good decade or two off, so this was money I wouldn’t need for a while. I knew that, long-term, investing in the stock market knocks the socks off saving. 

Analysis of returns since 1899 shows the probability of shares beating cash is 77 per cent over five years and 91 per cent over ten, according to this year’s Barclays equity gilt study.

Even after deciding to invest, I still agonised about where to put my money. I steered clear of choosing shares in individual companies, worried I would pick a Woolworths that would crash rather than a Microsoft that might soar.

Instead I focused on funds, where my money would be added to cash from other investors and spread over a variety of firms, nations and industry sectors.

When diving into uncharted waters, I also wanted to see a long track record. Past performance may be no guarantee of future returns but I was looking for investments that had stood the test of time, rather than something that was hot property at that moment and risky.

So I focused on investment trusts, many of which have been going strong for more than a century. These are themselves listed companies and you can invest by buying shares.

I also considered charges. Unlike savings accounts, investors must pay to invest, with potential fees for their trading platform, fund management as well as the cost of buying and selling shares. The lower the fees, the more money you can hang on to, boosting your chances of future growth.

The cheaper alternative to investment trusts would have been to use tracker funds.

These do not have a fund manager actively trying to pick winners and instead simply follow the performance of specific stock market indices, such as the FTSE 100 index of Britain’s biggest companies, or the global MSCI World stock market index.

They will never outperform expectations because their job is to track the market rather than exceed it – but for many investors that is more than enough of a return. Plus, there is no guarantee that paying for a professionally managed fund will make you more money.

I decided that I wanted professional fund managers choosing my investments.

Having narrowed it down this far, I wimped out and asked an independent financial adviser for his views. He suggested the City of London, Temple Bar, Scottish Mortgage and Finsbury Growth and Income investment trusts.

City of London, Temple Bar and Finsbury Growth and Income are all UK-focused and aim to pay out an income to their investors. Scottish Mortgage, despite the name, invests globally and backs disruptive companies, including top technology names such as Nvidia, Meta and Amazon.

All four had been around long enough to survive wars, depressions and turmoil, and had long-established managers.

City of London was founded 164 years ago, has paid rising dividends for the past 59 years and has been steered by the same fund manager, Job Curtis, for the past 34 years. Similarly Scottish Mortgage was started 116 years ago, while Temple Bar and Finsbury Growth and Income are both 99 years old.

In a very non-scientific approach, I decided to split my money equally between all four.

After forking out for dealing fees and stamp duty, I ended up investing roughly £7,100 in each trust back on September 25, 2015.

Even ten years on, I can still remember the stomach-churning moment when I pressed ‘buy’ for the first time. I was paranoid that I’d clicked on the wrong funds or chosen badly.

Fast forward to November this year and the £28,600 balance from my cash Isa has rocketed to more than £76,000 – a chunky gain of £47,400.

In just over ten years that represents an average annual growth rate of 10 per cent, far higher than I could ever have hoped from a savings account.

In reality, the headline return masks a rollercoaster ride, including Brexit, a global pandemic, the invasion of Ukraine and Trump’s tariffs.

In the first three years my money grew by more than 10 per cent, whereas in the fifth year it inched up by only 2 per cent.

The pandemic was utterly crazy. Markets sank as Covid hit and then soared before tumbling again. I was up 42 per cent in the year to September 2021 – only to see my investments plummet 26 per cent over the next year. I gritted my teeth and hung on in there.

The trusts have performed very differently. The last decade has not been entirely kind to UK equities.

Even so, my initial £7,100 in each trust has now grown to £12,450 in Finsbury Growth and Income, £15,215 in City of London and £17,600 in Temple Bar.

In contrast, the standout performer has been the global player, Scottish Mortgage, even if it has yet to return to its peak at the end of 2021. My Scottish Mortgage shares have quadrupled in value and are now worth more than £30,740.

I am very grateful for the growth in my Isa, as the larger pot could potentially help me to retire a few years earlier than the state pension age.

I plan to use tax-free withdrawals from my stocks and shares Isa to top up income from my private pensions, before my state pension payments kick in at 67.

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