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ISAs - UK - September 2015

"The ISA market is facing a period of significant upheaval. The dramatic increase in the value of the market following the introduction of the higher NISA limit highlights how these changes can present a great opportunity for the market."

Jessica Morley - Financial Services Analyst

This report looks at the following areas:

  • ISAs at risk of becoming out-competed by regular savings accounts
  • Goal-oriented ISAs have the potential to boost product uptake
  • Workplace ISAs could help encourage long-term saving

Following the increase in the NISA annual allowance to £15,000 in 2014, the value of ISA subscriptions increased by 38% by the end of the 2014/15 tax year. Most of this increase came from cash deposits, despite an overall decrease in the number of subscribed accounts for both cash, and stocks and shares deposits. As a result, average subscription value increased to £6,064 in 2014/15. This reveals that value growth has mainly been driven by a few affluent savers, with limited engagement in the ISA market from savers that do not fall within this bracket. Providers will need to tackle this disparity if they are to capitalise on the opportunities presented by an increasingly competitive personal savings market.

This report examines the ISA market, investigating competing products and factors influencing the market, including wider economic trends and regulatory challenges. It provides an overview of value and volume sales for cash and stocks and shares ISAs, including a market forecast showing expected growth in the value of the ISA market over the next five years. Mintel’s consumer research concludes the report, looking at product ownership, the value of ISA savings, motivations for saving, planned uses for ISA savings, ISA savings habits, and general attitudes towards ISA savings products and providers.

 

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Table of contents

  1. Introduction

      • Market definitions
        • Abbreviations
        • Executive Summary

            • The Market
              • Increased NISA limit significantly boosts market value
                • Figure 1: Number of ISAs and amounts subscribed 2008/09-2014/15
              • Value of both cash and stocks and shares ISA subscriptions expected to increase
                • Figure 2: Forecast of total adult cash ISA subscriptions, at current prices, 2009/10-2019/20
                • Figure 3: Forecast of total adult stocks and shares ISA subscriptions, 2009/10-2019/20
              • ISA market facing upheaval from government rule changes
                • Investment ISAs likely to appeal to retirees
                  • Impact of first interest rate rise will be measured
                    • Key Players
                      • High-street banks dominate the cash ISA market…..
                        • Figure 4: Main banking groups by proportion of cash ISA holders, February 2015
                      • …..but investors rely on specialist providers
                        • Figure 5: Top ten investment ISA providers, by ISA funds under management, June 2015
                      • Help to Buy ISA could provide cross-selling opportunities
                        • Goal-specific products hit the market
                          • Attention shifts from new business to retention and loyalty
                            • Online platforms that allow consumer engagement with investment strategy provide a way to stand out
                              • The Consumer
                                • ISAs are most likely to be cash, and are unlikely to be primary savings product
                                  • Figure 6: Ownership of specific ISA products, by overall ownership of ISAs, July 2015
                                • Savings goals are primarily generic, which is problematic for motivation
                                  • Figure 7: Proportion of savers saving for specific reasons, July 2015
                                  • Figure 8: Value of ISA savings, by value of savings, July 2015
                                • Planned uses for ISA savings drive bias towards cash products
                                  • Figure 9: Uses for ISA savings, July 2015
                                • Help to Buy ISA likely to be popular but in a niche market
                                  • Figure 10: Awareness of ISA regulatory changes, July 2015
                                • Consumer apathy means many miss the best deals
                                  • Figure 11: Attitudes towards ISAs and Savings, July 2015
                                • Greater ISA flexibility to appeal to a minority of ISA savers
                                  • Figure 12: ISA Savings habits, July 2015
                                • Focusing attention on investing opportunities could help ISAs stay competitive
                                  • Figure 13: Attitudes of current ISA savers towards ISA products, July 2015
                                • What we think
                                • Issues and Insights

                                  • ISAs at risk of becoming out-competed by regular savings accounts
                                    • The facts
                                      • The implications
                                        • Goal-oriented ISAs have the potential to boost product uptake
                                          • The facts
                                            • The implications
                                              • Workplace ISAs could help encourage long-term saving
                                                • The facts
                                                  • The implications
                                                  • The Market – What You Need to Know

                                                    • Increased NISA limit significantly boosts market value
                                                      • Value of both cash and stocks and shares ISA subscriptions expected to increase
                                                        • ISA market facing upheaval from government rule changes
                                                          • Investment ISAs likely to appeal to retirees
                                                            • Impacts of first interest rate rise will be measured
                                                            • Market Size and Forecast

                                                              • NISA limit increases ISA subscription value by almost 40%
                                                                • Figure 14: Number of ISAs and amounts subscribed 2008/09-2014/15
                                                              • Strong performance driven by popularity of cash ISAs
                                                                • Figure 15: Number of ISAs and amounts subscribed, segmented by component type, 2008/09-2014/15
                                                              • Higher earners take advantage of the higher subscription limit to push up average values
                                                                • Figure 16: Average subscription per account, 2008/09-2014/15
                                                              • Pension freedoms look set to boost investment trust ownership
                                                                • Figure 17: Value of funds held in adult ISAs, by type of investment, 2012-15
                                                              • Value of cash ISA market forecast to reach £82.7bn in the next five years
                                                                • Figure 18: Forecast of total adult cash ISA subscriptions, at current prices, 2009/10-2019/20
                                                                • Figure 19: Forecast of total adult cash ISA subscriptions, at current prices, 2009/10-2019/20
                                                              • 19% increase in stocks and shares ISA subscription value forecast
                                                                • Figure 20: Forecast of total adult stocks and shares ISA subscriptions, 2009/10-2019/20
                                                                • Figure 21: Forecast of total adult stocks and shares ISA subscriptions, 2009/10-2019/20
                                                            • Market Drivers

                                                              • Government budgets introduce large changes to the ISA market
                                                                • Figure 22: Summary of changes made to ISAs in the Autumn 2014 statement and 2015 Spring and Summer Budgets and their potential impacts on the market
                                                              • Pension Freedoms could boost the popularity of stocks and shares ISAs
                                                                • Savings ratio nears record low
                                                                  • Figure 23: Annual savings ratio, Q1 2007-Q1 2015
                                                                • FCA study concludes cash savings market not working for consumers
                                                                  • Low interest rates discourage saving
                                                                    • Figure 24: Average monthly quoted cash ISA variable rate and fixed rate, January 2011-July 2015
                                                                  • First interest rate rise on the horizon
                                                                      • Figure 25: Bank of England base rate and CPI – UK, January 2005-July 2015
                                                                  • Channels to Market

                                                                    • Researching and applying for accounts requires a multi-channel approach ….
                                                                      • …. but managing savings is an online-only affair for the majority of savers
                                                                        • Figure 26: Activities relating to savings, by channel preferences, February 2015
                                                                    • Key Players – What You Need to Know

                                                                      • High-street banks dominate the cash ISA market but investors rely on specialist providers
                                                                        • Help to Buy ISA could provide cross-selling opportunities
                                                                          • Goal-specific products hit the market
                                                                            • Attention shifts from new business to retention and loyalty
                                                                              • Online platforms that allow consumer engagement with investment strategy provide a way to stand out
                                                                              • Market Share

                                                                                • High street brands dominate cash ISA market …
                                                                                  • …with Lloyds Banking Group particularly popular
                                                                                    • Figure 27: ranking of the largest group providers of cash ISAs, by proportion of customers, February 2015
                                                                                  • Investors rely on specialist providers
                                                                                    • Figure 28: Top ten investment ISA providers, by ISA funds under management, June 2015
                                                                                • Competitive Strategies

                                                                                  • Help to Buy ISA could provide cross-selling opportunities
                                                                                    • Goal-specific products hit the market
                                                                                      • Nationwide helps consumers get on the property ladder
                                                                                        • Aegon supports retirees
                                                                                          • HSBC and Santander focus on loyal customers
                                                                                            • Incumbents aim to make saving simpler
                                                                                              • Nationwide and Lloyds Banking Group focus on products….
                                                                                                • ….while HSBC streamlines process
                                                                                                  • Online platforms encourage greater consumer involvement
                                                                                                  • Advertising Spend

                                                                                                    • Cash ISAs remain low priority for above-the-line advertising budgets
                                                                                                      • Figure 29: Total recorded above-the-line, online display and direct mail advertising spend on ISAs, by component type, 2010/11-2014/15
                                                                                                    • Traditional advertising of cash ISAs dominated by building societies
                                                                                                      • Figure 30: Top ten recorded above-the-line, online display and direct mail advertisers of cash ISAs, 2010-15
                                                                                                    • Top ten stocks and shares ISA advertisers increase spend by over a third
                                                                                                      • Figure 31: Top ten recorded above-the-line, online display and direct mail advertisers of stocks and shares ISAs*, 2010-15
                                                                                                    • ISA providers compete to top list of search results
                                                                                                      • A note on adspend
                                                                                                      • The Consumer – What You Need to Know

                                                                                                        • ISAs are most likely to be cash and are unlikely to be the primary savings product
                                                                                                          • Savings goals are primarily generic, which is problematic for motivation
                                                                                                            • Planned uses for ISA savings drive bias towards cash products
                                                                                                              • Help to Buy ISA likely to be popular, but within a niche market
                                                                                                                • Awareness and understanding of budget changes to personal savings market is limited
                                                                                                                  • Consumer apathy to shopping around
                                                                                                                    • Greater ISA flexibility to appeal to a minority of ISA savers
                                                                                                                      • ISAs could play a bigger role in retirement planning
                                                                                                                      • Savings Product Ownership

                                                                                                                        • 80% of consumers own at least one savings or investment product
                                                                                                                          • Figure 32: Ownership of savings products, July 2015
                                                                                                                        • Over half of all savers have an ISA
                                                                                                                          • Figure 33: Ownership of ISA and pension products, by ownership of any savings products, July 2015
                                                                                                                        • Cash ISAs account for 88% of all ISAs owned
                                                                                                                          • Figure 34: Ownership of specific ISA products, by overall ownership of ISAs, July 2015
                                                                                                                        • 27% rely on one savings product…
                                                                                                                          • Figure 35: Number of different savings and investments= products owned by savers, July 2015
                                                                                                                        • ….but this is unlikely to be an ISA
                                                                                                                          • Figure 36: Ownership of ISAs, by number of savings products owned, July 2015
                                                                                                                      • General Motivations for Saving

                                                                                                                        • Security remains the main motivation for saving
                                                                                                                            • Figure 37: Proportion of savers saving for specific reasons, July 2015
                                                                                                                          • The need to cultivate a long-term savings habit
                                                                                                                              • Figure 38: Consumer savings priorities, July 2015
                                                                                                                            • … but homeownership provides a fall back for many
                                                                                                                              • Bigger goals require more detailed planning
                                                                                                                                • Figure 39: Proportion of savers saving for retirement, by number of savings and/or investment products owned, July 2015
                                                                                                                            • Value of ISA Savings

                                                                                                                              • Stocks and shares ISAs hold higher values of savings
                                                                                                                                • Figure 40: Value of ISA savings, by value of savings, July 2015
                                                                                                                              • Young professionals could be encouraged to invest
                                                                                                                                • Figure 41: Value of ISA savings, by annual household income, July 2015
                                                                                                                              • Value is concentrated among higher earners
                                                                                                                              • Planned Use of ISA Savings

                                                                                                                                • ISAs provide a safety net for the short term and long term
                                                                                                                                  • Figure 42: Uses for ISA savings, July 2015
                                                                                                                                • Market for Help to Buy ISA will be niche ….
                                                                                                                                  • Figure 43: Planned uses for ISA savings, by those currently renting their home, July 2015
                                                                                                                                • An ISA for life?
                                                                                                                                  • Retirement plans drive up value of savings
                                                                                                                                    • Figure 44: Value of ISA savings, by top three uses of ISA savings, July 2015
                                                                                                                                • ISA Switching/New Account Opening

                                                                                                                                  • A third of cash ISA owners have switched or opened a new account in the last 12 months
                                                                                                                                    • Figure 45: Recent history of ISA switching and new account opening, July 2015
                                                                                                                                • Awareness of Budget Changes to ISAs

                                                                                                                                  • 38% unaware of changes to savings regulations
                                                                                                                                    • Figure 46: Awareness of ISA regulatory changes, July 2015
                                                                                                                                • ISA Savings Habits

                                                                                                                                  • Majority of ISA owners missing out on potential deals
                                                                                                                                    • Figure 47: ISA Savings habits, July 2015
                                                                                                                                  • ISAs predominantly used for long-term savings
                                                                                                                                    • Figure 48: Planned uses of ISA savings, by ISA savings habits, July 2015
                                                                                                                                  • Young savers want flexibility
                                                                                                                                    • Goal-oriented ISAs could create a more competitive market
                                                                                                                                      • Figure 49: Agreement with the statement “I regularly review the market to identify the best deals,” by whether or not consumers have an identified use for their ISA savings, July 2015
                                                                                                                                  • Attitudes towards ISAs and Savings

                                                                                                                                    • ISAs perceived as complex
                                                                                                                                      • Figure 50: Attitudes towards ISAs and Savings, July 2015
                                                                                                                                    • Prove the value to maintain relevance
                                                                                                                                      • Low interest rates and returning confidence lessen the motivation to save
                                                                                                                                        • Complexity damages consumer outcomes
                                                                                                                                          • Figure 51: Proportion of ISA savers who have switched accounts or opened a new account within the last 12 months, by attitudes towards ISAs and savings, July 2015
                                                                                                                                      • Attitudes towards ISA products

                                                                                                                                        • Increasing the range of products could help ISAs stay relevant in a tax-free savings environment
                                                                                                                                          • Figure 52: Attitudes of current ISA savers towards ISA products, July 2015
                                                                                                                                        • Boost retirement savings with a workplace ISA
                                                                                                                                        • Appendix

                                                                                                                                          • Best and worst case forecasts for cash ISA subscription value
                                                                                                                                            • Figure 53: Best and worst case forecasts for total adult cash ISA subscriptions, at current prices, 2014/15-2019/20
                                                                                                                                          • Best and worst case forecasts for stocks and shares ISA subscription value
                                                                                                                                            • Figure 54: Best and worst case forecasts for total adult stocks and shares ISA subscriptions, at current prices, 2014/15-2019/20
                                                                                                                                          • Cash ISA volume forecast
                                                                                                                                            • Figure 55: Market forecast for number of adult cash ISA subscriptions, 2009/10-2019/20
                                                                                                                                            • Figure 56: Market forecast for number of adult cash ISA subscriptions, 2009/10-2019/20
                                                                                                                                            • Figure 57: Best and worst case forecasts for total number of adult cash ISA subscriptions, 2014/15-2019/20
                                                                                                                                          • Stocks and Shares ISA volume Forecast
                                                                                                                                            • Figure 58: Market forecast for number of adult stocks and shares ISA subscriptions, 2009/10-2019/20
                                                                                                                                            • Figure 59: Market forecast for number of adult stocks and shares ISA subscriptions, 2009/10-2019/20
                                                                                                                                            • Figure 60: Best and worst case forecasts for number of adult stocks and shares ISA subscriptions 2014/15-2019/20

                                                                                                                                        Companies Covered

                                                                                                                                        To learn more about the companies covered in this report please contact us.

                                                                                                                                        ISAs - UK - September 2015

                                                                                                                                        £1,995.00 (Excl.Tax)