ISAs - UK - November 2016
“The ISA market is at a turning point. Overall contributions continue to grow driven by the stocks and shares sector of the market, but the number of accounts fell in the last tax year, as low interest rates undermine the incentive to save among many consumers. The introduction of the Personal Savings Allowance also poses a significant challenge for the ISA market, by undermining the main advantage offered over other savings products. However, the ISA market has an opportunity to service more long-term goals, through products like the Lifetime ISA.”
– Jessica Galletley, Financial Services Analyst
This report looks at the following areas:
- Lifetime ISA could reduce contributions to pension savings
- Simplifications undermined by launch of new ISAs
- Personal Savings Allowance: the end of ISAs?
During the 2015/16 tax year, the cash ISA and stocks and shares ISA markets performed very differently. The cash ISA market saw a 4% fall in contributions, whilst the stocks and shares ISA market grew by 20%. The low interest rate environment continues to be challenging for the cash savings market, with consumers lacking the incentive to save. Investments have benefited from this to some extent, as people are forced to look elsewhere in search of better returns for their savings.
However, the long-term future of the ISA market is in doubt, following the introduction of a Personal Savings Allowance (PSA). The PSA undermines the main tax-efficient advantage of saving in an ISA, by giving people a proportion of tax-free earnings on any savings income or interest, regardless of where their savings are held. Despite this, the ISA wrapper is still valued, and continues to be a key instrument used by the government to promote savings activity. Recent developments include the launch of the Innovative Finance ISA and the announcement of a Lifetime ISA.
This Report explores the ISA market, looking at how the market is performing and identifying the key opportunities and challenges it faces. It presents Mintel’s exclusive consumer research, which establishes consumer ownership of savings products, consumer savings priorities and planned uses of ISA savings. It examines consumer attitudes towards risk, and general attitudes towards ISAs and saving. It also explores consumers’ expected usage and awareness of the Lifetime ISA, and attitudes towards the product among the target 18-40 age group.
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