UK ISAs market report
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Providing the most comprehensive and up-to-date information and analysis of the ISAs market, and the behaviours, preferences and habits of the consumer.
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What are the key challenges facing the industry and how fast are its rates of growth? Who is the consumer and what do they want? Where are the opportunities, where are the risks and what lies ahead?
Products covered in this Report
For the purposes of this Report, Mintel has used the following definitions:
- Individual savings accounts (ISAs) are a tax-free ‘wrapper’ that can hold a range of investments and cash, and are exempt from income and capital gains tax. ISAs have an annual subscription limit, which means savers can only invest up to a specified amount each year. Up to £20,000 can be invested into an ISA in the current tax year (2017/18). The subscription limit applies to funds held across all different types of ISAs; however, money can be moved from stocks and shares to cash ISAs, and vice versa.
The ISA wrapper applies to both cash savings and stocks and shares investments:
- Cash ISAs are investments for cash savings. There are many varieties of cash ISA. Some will offer instant access to money with no penalty, while others will have restrictions, such as a fixed term, or require notice to be given before money can be withdrawn. If a withdrawal is made within a fixed period this may result in a penalty or loss of interest.
- Stocks and shares ISAs allow individuals to invest in a wide range of investments, including unit trusts, Open-Ended Investment Companies (OEICs), exchange-traded funds (ETFs), investment trusts, and corporate and government bonds. They can also wrap individual stocks and shares listed on a recognised stock exchange in a self-select ISA. Investments held in an ISA are exempt from capital gains tax, while dividends attract lower tax than on shares held outside an ISA.
A number of goal-specific and alternative investment ISA products have recently been launched or announced:
- Innovative Finance ISAs offer savers a tax-free wrapper for any savings income earned from peer-to-peer investments. As of 1 November 2016, the Innovative Finance ISA also includes earnings from crowd bonds. Investments made using an Innovative Finance ISA count towards an individual’s annual subscription limit.
- Help to Buy ISAs are a form of cash ISAs, specifically available for the purpose of saving towards a deposit on a first home. Savers qualify for a government bonus of 25% on all contributions to the ISA. Contributions count towards an individual’s overall ISA subscription limit. The Help to Buy ISA will only be available until 30 November 2019; however, contributions will be accepted until 30 November 2029.
- Lifetime ISAs are a new product that was announced in the March 2016 Budget and became available to savers in April 2017. Going forward, these are set to replace the Help to Buy ISA, giving savers the same 25% government bonus on contributions. The ISA will only be available to 18-40-year-olds. However, people can save in their Lifetime ISA and receive the 25% bonus until their 50th birthday. People can freely access the funds in their ISA after their 60th birthday, to help fund retirement; however, withdrawals are permitted before this to use as a deposit on a first home.
Expert analysis from a specialist in the field
Written by Jessica Galletley, a leading analyst in the Finance sector, her extensive knowledge delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.
A falling savings ratio and the launch of the Personal Savings Allowance pose a serious threat to the ISA market, with contributions falling for the fourth year running in 2016/17. However, low interest rates and the development of online platforms have driven new interest in the stocks and shares ISA market. This, along with the launch of the Lifetime ISA, has the potential to revive the market going forward.
Financial Services Analyst
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