Legal & General Dividend Yield Beats the Cash ISA Over 30 Years

The Legal & General dividend yield of 7.6% trailing makes LGEN the highest-yielding stock in the FTSE 100 right now, and for investors weighing up a Stocks and Shares ISA against a Cash ISA, the gap in long-term outcomes is wider than most realise.

What the numbers actually say about Cash ISAs versus equities

The average Cash ISA returned 1.21% a year over the past decade, according to financial guidance website Unbiased. The average Stocks and Shares ISA, with dividends reinvested, returned 9.64% annually over the same period. Compounded across a 30-year investment horizon, £20,000 in the average Cash ISA grows to £28,690. The same sum in the average Stocks and Shares ISA becomes £316,301.

That is not a marginal difference. It is the difference between supplementing a State Pension and replacing a salary.

The short-term caveat is real: over one year, a Stocks and Shares ISA could swing 20% or more in either direction. Cash will not. But for anyone with a timeline measured in decades rather than months, that volatility is the price of admission to compounding at a meaningfully higher rate.

The policy backdrop is shifting in the same direction. Chancellor Rachel Reeves announced, in the Autumn Budget, that the Cash ISA allowance for under-65s will fall from £20,000 to £12,000 in April 2027, according to MoneyHelper, the UK government-backed financial guidance service. The Stocks and Shares ISA allowance stays at £20,000. One further change worth noting: Morningstar reports that the Treasury has also published an anti-circumvention rule applying a flat 22% tax on income from cash held within a Stocks and Shares ISA. The direction of travel from policymakers is clear enough.

Legal & General dividend yield: what the 2024 results confirm

For investors looking at FTSE 100 income stocks, Legal & General Group (LSE: LGEN) sits at the top of the yield table. The full-year 2024 results, published on the London Stock Exchange, confirmed a full-year dividend of 21.36p per share, with a final dividend of 15.36p. That represents 5% growth year-on-year, a step down from the 10.7% average annual dividend growth Legal & General delivered over the prior 15 years, but still ahead of current inflation.

Alongside the dividend, the company announced a £500m share buyback programme, according to Hargreaves Lansdown. That combination of income and capital return is the kind of setup that tends to attract long-term holders rather than momentum traders.

The Asset Management division reported 4% revenue growth for the year, with global assets under management of £1.2 trillion, according to Interactive Investor. That AUM base is both the engine of fee income and the source of the key risk: a sustained market selloff would compress the value of those assets and reduce revenues accordingly.

The share price itself has spent much of the past decade going sideways. Over the last 12 months, though, LGEN has gained 12.7%. Combined with the 7.6% trailing yield, the total one-year return exceeds 20%. Whether that signals a genuine re-rating or a mean-reversion bounce is the open question.

Legal & General operates in a competitive market spanning insurance, asset management and retirement solutions. The business is cash-generative, but it is not immune to a broad equity drawdown. Investors in a SIPP or Stocks and Shares ISA need to hold through those periods rather than sell into them, which is precisely why the 30-year horizon matters.

The next test is whether the 5% dividend growth rate holds in 2025, or whether the company reverts toward the long-run 10.7% pace as its restructuring programme matures. The buyback completion timeline will offer a secondary read on capital confidence.