2024
9
UK ISAs Market Report 2024
2024-10-09T13:03:11+01:00
REP1B63DC7F_2D74_4A59_9418_B48C58907648
2195
176609
[{"name":"Savings and Investments","url":"https:\/\/store.mintel.com\/industries\/financial-services\/savings-investments"}]
Report
en_GB
The freeze on income tax thresholds, alongside real-terms income growth, has led to more people paying the higher tax rate due to 'fiscal drag'. ISAs' tax-free status strongly benefits savers…

UK ISAs Market Report 2024

£ 2,195 (Excl.Tax)

Report Summary

The future looks promising for the UK ISAs market. The tax-free benefits are attracting customers affected by the freeze on income tax thresholds. It is important for financial service providers to improve communication and transparency in order to enhance consumers’ understanding of the new ISA rules.

UK ISA Market – Current Landscape

The freeze on income tax thresholds, alongside real-terms income growth, has led to more people paying the higher tax rate due to ‘fiscal drag’. ISAs’ tax-free status strongly benefits savers who would otherwise forfeit 40-45% of their savings income that exceeds the personal savings allowance, which currently stands at just £500 for higher-rate taxpayers. As income tax thresholds remain unchanged, we can expect to see a rise in the use of ISAs.

ISA product complexity can hinder product engagement and good consumer outcomes. As the government and FCA increase efforts to boost advice and guidance, ISA providers will need to ensure their products are accessible, easy to understand and align with saving and investing motivations.

Relying on savings guidance from non-experts, such as family and friends, can expose consumers to negative outcomes. Brands have an opportunity to launch referral programs where current users, and the people they refer, can receive a bonus payment into an ISA account or a limited-time boost to interest rates if they encourage somebody else to receive advice via a provider. A major barrier to receiving advice is the costs involved. This would nudge people towards sources of guidance, while improving potential savings returns.

UK ISAs Market Statistics

  • UK ISAs market size: The value of ISA subscriptions in the UK increased by almost 8% in 2022/23.
  • UK ISA ownership: Over a third of UK consumers own a cash ISA as of June 2024.
  • UK ISA consumer attitudes: Over half of UK consumers expect to save more money in ISAs than any other savings/investments accounts.

UK ISAs Market Report – What’s Inside?

 

Key Topics Analysed in the Report

  • The short-, medium- and long-term impact of the economic climate and taxation changes on ISAs
  • The factors that motivate saving in an ISA and whether cash products are preferred to investment options
  • The most popular ISA brands and how platforms are innovating to maintain share
  • Consumer interest in Lifetime ISAs and current ISA owners’ plans to save/invest in more than one ISA account of the same type following the introduction of new ISA rules

 

Report Scope

The focus of this Report is on the adult ISA market. Launched by the UK government in April 1999, an ISA is a tax wrapper for holding a range of investments that are exempt from income and capital gains tax. The ISA allowance – the maximum that can be deposited or invested in an ISA per tax year – is currently £20,000 (although the maximum that can be put into a lifetime ISA is £4,000 per year). This can all be put into one ISA or split between a number of ISA accounts.

The market comprises four product types:

  • Cash ISAs are available to UK residents aged 18+.
  • Stocks and shares ISAs are available to UK residents aged 18+.
  • Lifetime ISAs were introduced in April 2017 to help young adults save for a home/retirement. Only those aged 18-39 can open a LISA.
  • Innovative finance ISAs (IFISA), introduced in 2016, offer individuals aged 18+ a tax-free wrapper for any income earned from peer-to-peer investments.

Many individuals still retain a Help to Buy ISA, even though this type of ISA product was withdrawn at the end of November 2019.

Meet the Expert Behind the Analysis

This report was written by Lewis Cone, Mintel’s Associate Director – Financial Services. Lewis joined Mintel in May 2013 having graduated from the University of Southampton with a 2.1 BSc (Hons) degree in Economics and writes a range of industrial reports, from occupational health to the house building market.

New ISA rules have the potential to increase participation, but providers must ensure guidance is available to help savers make informed decisions aligned with their financial goals.

Lewis Cone - Research AnalystLewis Cone
Associate Director – Financial Services

Table of Contents

  1. Executive Summary

    • Opportunities for the ISAs market
    • ‘Fiscal drag’ increases scope for ISA ownership
    • Promote LISAs to self-employed people under-40 who cannot access workplace pensions
    • Educate consumers on new rule changes to boost trust
    • Market dynamics and outlook
    • Market size & forecast
    • Market predictions
    • Cash ISA subscriptions forecast to reach £63 billion by 2029/30
    • Stocks and shares ISA subscriptions to gradually rebound from 2025/26
    • Value of ISA subscriptions rose by 7% in 2022/23
    • Graph 1: adult ISA market, by value and volume* of subscriptions, 2018/19-22/23
    • Average subscriptions rose in cash and LISAs
    • Graph 2: average subscription, by type of ISA, 2017/18-22/23
    • Stabilising global economy should lead to stocks and shares ISA recovery
    • What consumers want and why
    • Savers continue to prefer products with secure returns
    • Almost three-quarters of ISA owners have deposited funds in the last year
    • Graph 3: consumers who have put money into an ISA in the last 12 months, 2024
    • Tax-free benefits and high accessibility prompt ISA saving
    • Graph 4: reasons for putting money into an ISA(s), 2023-24
    • High rates and account flexibility influence choice of ISA
    • Regular contributions and increase in ISA savings expected
    • Innovation and marketing
    • interactive investor launches managed ISA service
    • WEALTH at work launch workplace ISA
  2. Market Dynamics

    • Market size
    • Value of ISA subscriptions rose by 7% in 2022/23
    • Higher interest rates boost ISA participation
    • Cash segment increased its share of ISA Funds in 2022/23
    • Graph 5: market value of ISA assets under management, by component, 2012/13-22/23
    • Further cuts to interest rates could revive the appeal of stocks and shares
    • Value of OEICs and unit trusts fall, but maintain dominant position in stocks and shares ISA assets
    • Savers continue to opt for managed funds
    • Market forecast
    • Cash ISA subscriptions forecast to reach £63 billion by 2029/30
    • Cash ISAs will benefit from interest rates and upcoming tax changes
    • Stocks and shares ISA subscriptions to rebound from 2025/26
    • Improving economic situation will boost activity for stocks and shares ISAs
    • Market segmentation
    • Cash ISAs values and volumes surge in 2022/23
    • Economic uncertainty deters stocks and shares ISA activity
    • Lifetime ISAs continue to rise in volume and value
    • Innovative finance ISA market stagnates
    • Average subscriptions rose for cash and LISAs
    • Graph 6: average subscription, by type of ISA, 2017/18-22/23
    • Higher average balances for stocks and shares ISA
    • Market share
    • Barclays and Lloyds lead the cash ISA market
    • Graph 7: market share of cash ISA or cash lifetime ISA providers, 2024
    • Retail banking brands form majority of cash ISA market
    • Barclays rises to market-leader status in the stocks and shares ISAs
    • Graph 8: market share of stocks and shares ISA or stocks and shares lifetime ISA providers, 2024
    • Competition is more fragmented in stocks and shares ISA sector
    • Cash ISAs rebound in popularity following period of stagnation
    • £360 billion held in ISA products as of May 2024
    • Channels to market
    • Non-advised sales remain largest source of new ISAs
    • Market environment
    • Base Rate remains elevated, although first cut has been made
    • Cash ISA rates fall from peak at the end of 2023
    • ISA rates remain comparable with fixed bonds rates
    • Graph 9: average monthly quoted interest rates for fixed cash ISAs and fixed bonds, 2021-24
    • Stabilising global economy should lead to stocks and shares ISA recovery
    • Increasing number of higher rate taxpayers will boost ISA appeal
    • Graph 10: number of basic and higher-rate taxpayers, 2020/21-24/25
    • Consumer sentiment: wellbeing recovery stagnates
    • Graph 11: the financial wellbeing index, 2016-24
    • Consumer confidence remains fragile
    • Graph 12: the financial confidence index, 2016-24
    • Household savings ratio continues to climb
    • Graph 13: household savings ratio, 2019-24
    • Savings security is vital to consumers’ financial recovery
    • Social, environmental and legal factors
    • New ISA changes allow multiple subscriptions
    • Minimum age upped and reapplication process updated
    • Providers call for further reforms to ISA allowance limit and lifetime ISAs
    • Reductions in CGT and dividend allowances could lead to increased ISA investment
    • British ISA plans under threat
    • FCA’s Consumer Duty will require firms to take a more consumer-centric approach
  3. What Consumers Want and Why

    • ISA ownership
    • Savers continue to prefer products with secure returns
    • Graph 14: ownership of savings and investment products, 2024
    • Cash ISAs remain the most widely held ISA
    • Younger, wealthy savers are most likely to own a stocks and shares ISA
    • Graph 15: ownership of stocks and shares ISAs, by age, 2024
    • A third of consumers only save or invest through one product
    • ISAs are typically owned by those with multiple products
    • Graph 16: ownership of savings and investment products, by repertoire analysis, 2024
    • Savers build-up experience before using a more complex product
    • ISA participation
    • Almost three-quarters of ISA owners have deposited funds in the last year
    • Graph 17: consumers who have put money into an ISA in the last 12 months, 2024
    • Lowest-earning savers seek ISA returns
    • Activity remains high amongst all levels of cash savings
    • Graph 18: consumers who have put money into an ISA in the last 12 months, by value of cash savings – net, 2024
    • Reasons for saving in an ISA
    • Tax-free benefits and high accessibility prompt ISA saving
    • Graph 19: reasons for putting money into an ISA(s), 2023-24
    • Tax-free aspect particularly appealing to older ISA owners
    • Graph 20: ISA owners who put money into the product for tax-free returns/interest, by age, 2024
    • Convenience and low barriers to ownership drives ISA activity
    • Stocks and shares ISAs support longer-term savings goals with higher returns
    • Graph 21: reasons for putting money into an ISA(s), by product ownership, 2024
    • Factors when taking out an ISA
    • High rates and account flexibility influence choice of ISA
    • Graph 22: important factors when taking out an ISA, 2024
    • Flexibility to move funds is most valued by those over-45
    • Graph 23: consumers who would like flexibility to move money in and out of an ISA, by age , 2024
    • Tailor ethical products so that they meet the needs of younger savers
    • Graph 24: ethical savings/investment options are important when taking out an ISA, by age, 2024
    • Signposting to low cost advice and offering referral bonuses will boost access to advice
    • Attitudes and behaviours towards ISAs
    • Regular contributions and increase in ISA savings expected
    • Graph 25: attitudes and behaviours towards ISAs, 2024
    • Many ISA owners expect to regularly contribute over the current tax year
    • Promote greater accessibility and improving housing market to boost LISA uptake
    • Graph 26: attitudes and behaviours towards Lifetime ISAs, 2024
    • Early intervention will help younger owners make the most out of ISAs
    • Graph 27: intention to find out more information about ISA’s tax-efficient benefits, by age, 2024
    • Simplify stocks and shares investing to maximise under-45 ownership
    • Graph 28: consumers planning to invest in a stocks and shares ISA for the first time, by age, 2024
    • New ISA rules hold most appeal for young, wealthy parents
    • Promote opening the same type of ISA to parents who would like flexibility with their child’s savings
  4. Innovation And Marketing Trends

    • Competitive strategies
    • Nude Finance acquired by mortgage specialist Tembo
    • Tembo adds limited-time cashback bonus payment to its cash LISA
    • AJ Bell Dodl introduces market-leading rate on uninvested ISA cash
    • Scottish Friendly enhances JISA to encourage future investors
    • Launch activity and innovation
    • Hargreaves Lansdown embraces new cash ISA flexibility
    • LHV Bank’s adds products to HL platform before launching D2C
    • interactive investor launches managed ISA service
    • Novia Global launches stocks and shares option for expats
    • WEALTH at work launch workplace ISA
    • Belong aims to democratise millennial investments
    • Several brands launch boosted rate cash ISA products
    • Advertising and marketing activity
    • ISA advertising spend declines in 2023/24
    • Advertising spend is focused on the lead-up to ISA season
    • Graph 29: monthly above-the-line, online display and direct mail adspend on ISAs, 2022-24
    • Digital and TV advertising attract greatest focus from ISA providers
    • Graph 30: proportional distribution of above-the-line, online display and direct mail adspend on ISAs, by media type, 2019/20-23/24
    • TV ad spend rebounds, but digital advertising leads the way
    • Moneybox and Trading 212 top advertising spend in 2023/24
    • Virgin Money promotes its affordable stocks and shares ISA
    • interactive investor’s ‘ii’ robots give people an ‘ii’ for investing
    • Vanguard launches third instalment of its ‘Value to Investors’ campaign
  5. Brand research

    • RBS enjoys high awareness and is most used
    • Graph 31: key brand metrics for selected ISA brands, 2024
    • Vanguard viewed as offering the best experience and is highly recommended
    • Hargreaves Lansdown and Shawbrook Bank are most differentiated
    • Graph 32: attitudes towards and usage of selected ISA brands, 2024
    • RBS is seen as the most trusted
    • Graph 33: attitudes towards selected ISA brands, 2024
    • Hargreaves Lansdown is the highest regarded platform-based brand
    • Graph 34: reputation and customer service in selected ISA brands, 2024
    • ISA brands are seen as reliable, helpful and competent
    • Graph 35: brand personality in selected ISA brands – micro image, 2024
    • Nutmeg and Vanguard are regarded as the most prestigious brands
    • Graph 36: premium value and loyalty rewards in selected ISA brands, 2024
    • There remains scope for all brands to improve perception of value
    • ISA brands are viewed as accessible and ethical
    • Graph 37: brand personality in selected ISA brands – macro image, 2024
  6. Appendix

    • Market forecast data and methodology
    • Market forecast for cash ISAs – value
    • Market forecast for cash ISAs – volume
    • Market forecast for stocks and shares ISAs – value
    • Market forecast for stocks and shares ISAs – volume
    • Forecast methodology
    • Report scope and definitions
    • Market definition
    • Abbreviations and terms
    • Methodology
    • Consumer research methodology
    • CHAID analysis – methodology data
    • CHAID analysis – methodology data table
    • External data sources
    • Nielsen Ad Intel coverage

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