2022
9
UK ISAs Market Report 2022
2022-09-07T04:06:33+01:00
OX1101815
2195
155508
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Report
en_GB
“Three quarters of UK savers and investors expect to have less money to put towards their savings and investments due to the rising cost of living. With interest rates now…

UK ISAs Market Report 2022

£ 2,195 (Excl.Tax)

Description

The UK ISAs Market Report identifies consumers’ attitudes toward saving and investing with ISAs, the leading providers of ISAs, and future innovations within the ISA market. This report covers ISAs market size, market forecast, market segmentation and saving and investing trends in the UK.

 

Current ISA Market Landscape 

There is a renewed interest in ISA saving and a growing appetite for ISA investing. This is happening at a time when rising food and fuel prices are restricting many people’s ability to save or invest to the extent they would like. Stocks and shares ISAs will see steady inflows as more people search for better returns than cash ISAs although great volatility will deter some.

ISA Market Share and Key Industry Trends

Inflationary pressures will persist, and economic conditions will remain tough, limiting consumers’ ability to enter the ISA market. Given the threat of lower savings activity overall, cash ISA providers can grow their share of retail balances by being more price-competitive relative to rival, taxable savings accounts. Similarly, investment ISA providers can harness the current investing trends by actively promoting their ready-made portfolios and digital investment services.

  • 73% of UK consumers agree that the rising cost of living will reduce the amount of money they contribute to savings.
  • 58% of UK consumers have a savings account.
  • 26% of UK savers are likely to open a stocks and shares ISA in the next 12 months.

 

Future Investing Trends in the UK Market

Digital developments will continue to shape the retail investing and saving market in the UK. Improved economic conditions and levels of market competition will support cash ISAs and stocks and shares ISAs subscription levels. There will be renewed interest in ethical, green and sustainable funds in the ISA market in the near future.

Read on to discover more details or take a look at all of our UK Financial Services market research

Quickly Understand

  • Explores the adult ISA market size, by subscriptions and funds under management.
  • The leading providers of cash ISAs and stocks and shares ISAs.
  • Impact of rising inflation on saving and investing activity.
  • Behaviours relating to the ISA market and investing trends.
  • Appeal of ISAs versus other common savings and investment products.
  • Intentions to save and invest in an ISA over the coming year.

 

Covered in this Report

Products: Cash ISAs, Stocks and shares ISAs, Lifetime ISA, Innovative finance ISA, Help to Buy ISA.

Brands:  Barclays, Nationwide, Halifax, Bank of Scotland, Lloyds, Santander, Virgin Money, Co-op, Metro Bank, TSB Bank, M&S Bank, Tesco Bank, Monzo, Shawbrook.

 

Expert Analysis from a Specialist in the Field

This report, written by Sarah Hitchcock, a leading analyst in the Financial sector, delivers in-depth commentary and analysis to highlight current trends in the ISA market and add expert context to the numbers.

“Three quarters of UK savers and investors expect to have less money to put towards their savings and investments due to the rising cost of living. With interest rates now moving upwards, cash ISA providers should take the opportunity to grow their share of retail balances by offering more competitive rates relative to other cash savings. Providers of stocks and shares, innovative finance and investment Lifetime ISAs will benefit from more savers seeking protection from the effects of inflation.”

Sarah Hitchcock
Financial Services – Associate Consultant

Table of Contents

  1. Overview

    • Key issues covered in this Report
    • Market context
    • Product definitions
  2. Executive Summary

    • The five-year outlook for the adult ISA market
      • Figure 1: Adult ISA market outlook, 2022/23-27/28
    • The market
    • A mixed picture
    • Cash ISA market – recent performance and outlook
      • Figure 2: Market forecast for value of cash ISA subscriptions, 2017/18-2027/28
    • Stocks and shares ISA market – recent performance and outlook
      • Figure 3: Market forecast for value of stocks and shares ISA subscriptions, 2017/18-2027/28
    • Lifetime ISAs attract larger balances
    • IFISA market hit by provider exits and more stringent rules
    • Growth of non-advised sales of investment ISAs
    • Rising inflation will prompt savers and investors to shop around for better deals…
    • …and shift more of their savings into investments in search of better returns
      • Figure 4: Agreement with statements about the impact of rising inflation on saving and investment activity, 2022
    • Growth in DIY investment increases the need for guidance
    • Companies and brands
    • Top retail banking providers hold lion’s share of cash ISA subscribers
      • Figure 5: Type of provider hold cash ISA with, 2022
    • Investment platforms have the largest share of stocks and shares ISA subscribers
      • Figure 6: Type of provider hold stocks and shares ISA with, 2022
    • Recent increases to the Base rate prompt a wave of cash ISA launches
    • Technological developments continue to shape the investment ISA market
      • Figure 7: Activities performed in relation to stocks and shares ISA, 2022
    • Rise of social trading
    • The consumer
    • Stable penetration of cash ISAs
      • Figure 8: Ownership of ISAs and other savings/investment products, by age, 2022
    • 12% of under-45s have a Lifetime ISA
    • 37% of adults would choose to save or invest in an ISA if given £1,000
      • Figure 9: Preferred product to save or invest £1,000 (theoretical scenario), 2022
    • 29% of adults intend to open a cash ISA within the coming year…
      • Figure 10: Intention to save in a cash ISA over the coming year, 2022
    • …while almost as many plan to open a stocks and shares ISA
      • Figure 11: Intention to invest in a stocks and shares ISA over the coming year, 2022
  3. Issues and Insights

    • Rising inflation presents opportunities for ISA providers…
    • …particularly, those offering stocks and shares ISAs
    • Guide investors through the troughs as wells as the peaks…
    • …and provide them with the means to share their experience and seek reassurance
  4. Market Size and Performance

    • Number of ISA subscriptions fell 6% in 2020/21…
    • …as demand for cash ISAs recedes
      • Figure 12: Volume and value of adult ISA subscriptions, 2011/12-20/21
    • Value of ISA assets grew by 11%
      • Figure 13: Market value of ISA assets under management, by component, 2011/12-20/21
    • OEICs and unit trusts see share of market increase
      • Figure 14: Market value of ISA assets under management, by component and type of investment, 2016/17-20/21
  5. Market Segmentation

    • Cash ISAs fall out of favour…
    • …while stocks and shares component see increased inflows
      • Figure 15: Cash and stocks & shares ISAs – Number newly subscribed to and amounts subscribed, 2014/15-2020/21
    • Lifetime ISAs attract larger subscription values
      • Figure 16: Lifetime ISAs – Number newly subscribed to and amounts subscribed, 2017/18-2020/21
    • Innovative finance ISA subscriptions continue to decline
      • Figure 17: Innovative finance ISAs – Number newly subscribed to and amounts subscribed, 2016/17-2020/21
    • Average stocks and shares ISA subscription is double that of cash ISA
      • Figure 18: Average subscription, by type of ISA, 2016/17-2020/21
  6. Market Forecast

    • Demand for ISAs overall will grow
      • Figure 19: Adult ISA market outlook, 2022/23-27/28
    • Cash ISA subscriptions to increase
      • Figure 20: Market forecast for value of cash ISA subscriptions, 2017/18-2027/28
    • Stocks and shares ISA subscriptions also set to grow
      • Figure 21: Market forecast for value of stocks and shares ISA subscriptions, 2017/18-2027/28
    • Learnings from the last income squeeze
      • Figure 22: Cash and stocks & shares ISAs – Number newly subscribed to, amounts subscribed and average subscription, 2008/09-2013/14
    • Forecast methodology
  7. Channels to Market

    • Cash ISAs are predominantly sold direct to consumers
    • Intermediaries play a larger role in the sale of stocks and shares ISAs…
    • …although non-advised channels have seen the greatest growth in recent years
      • Figure 23: New sales of investment ISAs, by channel, 2019-21
  8. Market Drivers

    • Consumers’ sense of financial wellbeing ebbs as inflation soars
      • Figure 24: Household financial wellbeing index, 2016-22
    • Bank of England raises interest rates to tackle inflation
      • Figure 25: Average quarterly changes in the Bank of England Base rate and CPI, Q1 2019-Q2 2022
    • Cash ISAs offer similar rates of return as their taxable equivalents
      • Figure 26: Average monthly quoted interest rates for a one-year fixed cash ISA versus a one-year fixed bond, January 2012-June 2022
    • Cash ISAs have fared poorly during the pandemic
      • Figure 27: Household deposit balances, by product type, 2019-22
    • Growing number drawn into higher tax bracket
      • Figure 28: Number of basic and higher-rate taxpayers, 2019/20-2022/23
    • Tax benefits of investing in an ISA
    • Increased market volatility increases the need for guidance and advice
    • Providers must arm investors with the knowledge to make “smart” decisions
  9. Market Share

    • Barclays and Nationwide lead the way in the cash ISA market
      • Figure 29: Provider of cash ISA, 2022
    • Building societies are better at attracting older, wealthier cash ISA savers
      • Figure 30: Type of provider hold cash ISA with, 2022
    • Challenger banks fare well in the cash ISA market
    • Many ISA subscribers have multiple accounts with different providers
    • The retail banks have a big slice of the investment ISA market…
      • Figure 31: Provider of stocks and shares ISA, 2022
    • …but fund platforms attract the largest share of customers overall
      • Figure 32: Type of provider hold stocks and shares ISA with, 2022
  10. Competitive Strategies and Innovation

    • Base rate rises prompt a spate of new cash ISA launches
    • Spotlight on Paragon Bank
    • Innovative finance ISA market afflicted by a series of market exits…
    • …leaving the door open for new entrants to emerge
    • The growing popularity of ready-made portfolios
    • ‘Model’ portfolios attract investors who want more flexibility and control
    • New players emerge and expand
  11. Advertising and Marketing Activity

    • Low level of above-the-line advertising focused on ISAs
      • Figure 33: Total above-the line, online display and direct mail advertising expenditure on ISAs, 2018/19-2020/21
    • Considerable seasonal variation in adspend levels
      • Figure 34: Monthly above-the line, online display and direct mail ISA adspend, April 2020-March 2022
    • ISA advertisers employ a multi-channel approach
      • Figure 35: Proportional distribution of above-the line, online display and direct mail ISA adspend, by media type, 2018/19-2020/21
    • A mix of provider types among the top 10 ISA advertisers in 2021/22
      • Figure 36: Top ten above-the line, online display and direct mail ISA advertisers, 2018/19-2020/21
    • Nielsen Ad Intel coverage
  12. ISA Ownership

    • Take-up of cash ISAs is stable at 33% …
      • Figure 37: Ownership of ISAs and other savings/investment products, by age, 2022
    • …but there’s scope to expand it further
      • Figure 38: Amount of cash savings, by cash ISA holders and savings account holders, 2022
    • 16% of adults own a stocks and shares ISA
    • 49% of UK adults have some form of ISA
    • Scope to expand Lifetime ISA market by targeting Help to Buy ISA savers
  13. Investing in a Stocks and Shares ISA

    • Ready-made portfolios have greater appeal among under-45s
    • Over-45s are more inclined to use an adviser
      • Figure 39: Activities performed in relation to stocks and shares ISA, by age, 2022
    • Under-45s are roughly twice as likely as over-45s to switch providers
  14. Appeal of ISAs Versus Other Savings/Investments

    • Most people value security over the prospect of better returns
      • Figure 40: Preferred product to save or invest £1,000 (theoretical scenario), 2022
    • 37% would save or invest in an ISA
    • 10% of under-40s would choose a Lifetime ISA
      • Figure 41: Preferred product to save or invest £1,000 (theoretical scenario), by 18-39-year-olds only, 2022
    • Savers split on whether to go for a fixed-term product or one offering easy access
    • Give fixed-rate customers scope to switch to another product without penalty
    • 70% of cash ISA subscribers see the benefit in saving in an ISA
      • Figure 42: Agreement with statement about the benefit of saving of a cash ISA versus other saving accounts, 2022
  15. Intention to Save or Invest in an ISA

    • Strong appetite for cash ISA saving, especially among under-35s
      • Figure 43: Intention to save in a cash ISA over the coming year, 2022
    • 17% of non-ISA subscribers plan to start investing in an ISA over the coming year
      • Figure 44: Intention to invest in a stocks and shares ISA over the coming year, 2022
  16. Implications of Rising Inflation for Saving and Investing

    • 73% of savers have less money to save as the cost-of-living soars…
    • …prompting many to shop around and consider alternatives…
      • Figure 45: Agreement with statements about the impact of rising inflation on saving and investment activity, 2022
    • …providing opportunities for ISA providers
  17. Appendix: Data Sources and Abbreviations

    • Abbreviations
    • Consumer research methodology
  18. Appendix: Forecast Methodology

    • Market forecast and prediction intervals – Cash ISAs
      • Figure 46: Market forecast and prediction intervals for value of cash ISA subscriptions, 2021/22-27/28
      • Figure 47: Market forecast for value of cash ISA subscriptions, at constant and current prices, 2017/18-27/28
      • Figure 48: Market forecast and prediction intervals for volume of cash ISA subscriptions, 2021/22-27/28
    • Market forecast and prediction intervals – Stocks and shares ISAs
      • Figure 49: Market forecast and prediction intervals for value of stocks and shares ISA subscriptions, 2021/22-27/28
      • Figure 50: Market forecast for value of stocks and shares ISA subscriptions, at constant and current prices, 2017/18-27/28
      • Figure 51: Market forecast and prediction intervals for volume of stocks and shares ISA subscriptions, 2021/22-27/28
    • Market drivers and assumptions
    • Forecast methodology

About the report

This market report provides in-depth analysis and insight supported by a range of data. At the same time, introductory and top-level content is provided to give you an overview of the issues covered.

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