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Individual Savings Accounts in the UK - Key Trends and Opportunities to 2018

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Published Date : Feb 2015

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No. of Pages : 71 Pages


This report provides market analysis, information and insights into the UK ISA industry

  • It provides a breakdown of the different forms of ISAs in the UK
  • It analyses drivers and the outlook for the market
  • It provides information on the main banks in the UK market
  • It covers news and regulatory developments

Executive summary

Interest rates are at their lowest levels since individual savings accounts (ISAs) began, which significantly reduces consumers’ commitment to saving. As a result, consumers – those who can afford to save – are starting to opt either for stocks and shares accounts or deciding to pay off long-standing debts with higher interest rates.
The average rate offered on cash ISAs fell from 2.55% at the start of 2012 to 1.74% in February 2013, and to just 1.64% at the start of 2014. The average rates for savings accounts fell from 5.09% in 2008 and 1.48% in 2014, which highlights the impact of the recession and the availability of cheap funds for the banks.

Eight out of every 10 ISAs opened in FY2013–2014 were still cash ISAs however, as savers remained risk-averse, despite banks offering the worst interest rates on record. Stocks and shares ISAs are starting to recover however, following a substantial decline in the number for accounts from FY2010–2011 to FY2011–2012. The amount subscribed to stocks and shares ISAs has increased considerably since FY2009 – from GBP12.5 million to GBP18.4 million - which suggests that a smaller percentage of wealthier people, who can afford the increased risk, are filling these ISAs to the limit.

The BoE’s central bank rate has remained at 0.5% since 2009, providing banks with an unparalleled level of cheap funds, meaning that the banks have significantly less need to compete for funds from consumers. The introduction of the government’s Funding for Lending scheme – providing up to GBP80.0 billion to major banks to subsidize mortgage lending – has further reduced the banks’ need for funds, which has had a considerable impact on the savings market. There have been an estimated 2,560 savings products cut since the introduction of the Funding for Lending scheme in August 2012, as of November 2014.

Real wages endured negative growth for most of the 2008–2014 period, despite positive growth for the last three months of 2014. This, combined with soaring house prices and energy bills, means that consumers were squeezed during the recession, and are subsequently less able to set aside amounts every month for savings accounts. House prices in the UK increased by 18.6% between 2009 and 2014 – rising by 9.9% in 2014 alone, according to Nationwide’s house price index. Research by consumer body Which? found that the price of gas and electricity grew by 127% from 2003–2004 to 2013–2014, and that the average household is paying GBP410.0 more per year for energy, despite using less.

Several changes have been made to ISA regulation to try to stimulate the industry in the face of low interest rates, since the Funding for Lending scheme. New ISAs (NISAs) were introduced in the April 2014 budget, which increased the upper annual limit for an individual to GBP15,000.0. Tax advantages were also introduced in Chancellor George Osborne’s 2014 Autumn Statement, allowing ISAs to pass tax-free to a spouse after death. Osborne also announced that there will no longer be capital gains tax for profits of under GBP11,000.0 on stocks and shares ISAs.


This report provides market analysis, information and insights into the UK ISA industry

  • It provides a breakdown of the different forms of ISAs in the UK
  • It analyses drivers and the outlook for the market
  • It provides information on the main banks in the UK market
  • It covers News and regulatory developments

Key highlights

Consumer credit growth has shown consistent signs of growth in 2014, for the first time since before the financial crisis. This is in a large part due to consumer confidence also recording a positive number for the first time since the credit crunch, low interest rates and a steadily growing GDP, as nearly every category of lending has grown up to July 2014.Demand for and availability of credit also grew in both the second and third quarters of 2014, which has been a key factor.

Reasons to buy

Gain an understanding of the UK ISA industry
1 Executive Summary 2

2 Introduction 8
2.1 What is this Report About? 8
2.2 Definitions 8
2.3 Methodology 9

3 Market Analysis 11
3.1 Market Size 11
3.1.1 Cash ISAs 13
3.1.2 Cash ISA Breakdown 16
3.1.3 Stocks and shares ISAs 17
3.1.4 Sight and time deposits 20
3.1.5 National Savings and Investments (NS&I) 22
3.1.6 ISAs by region 23
3.1.7 ISAs by income group 24
3.1.8 Junior ISAs 25
3.1.9 ISAs by age and gender 27
3.2 ISA Interest Rates 29
3.3 Market Outlook 30
3.3.1 Total Number of ISAs 31
3.3.2 Cash ISAs 32
3.3.3 Stocks and Shares ISAs 32
3.3.4 Interest Rates 33

4.1 Economic Backdrop 34
4.1.1 Labor market conditions 34
4.1.2 Disposable income 37
4.1.3 Inflation 38
4.1.4 Central bank rate 38
4.1.5 Energy bills 40
4.1.6 House prices 41
4.2 Saving Behavior 42
4.2.1 Savings ratio 42
4.2.2 Switching providers 43
4.2.3 Saving motivations 43
4.2.4 Sentiment towards banks 44

5 Competitive Landscape 45
5.1 Market Shares 45
5.2 ISA Interest Rates 47

6 Product Innovation 48

7.1 Recent Changes 50
7.1.1 Cash ISA allowance and NISA 50
7.1.2 Funding for Lending scheme 51
7.1.3 Financial Services Compensation Scheme 51
7.1.4 Capital Requirements Directive IV (CRD IV) 51
7.1.5 Financial Services (Banking Reform) Act 2013 51
7.2 Upcoming Regulations 51
7.2.1 Basel III 51

9 News 54

10 UK Retail Banks 55
10.1 Barclays Plc – Company Overview 55
10.1.1 Barclays Plc – profile 55
10.1.2 Barclays Plc – main savings products 55
10.1.3 Barclays Plc – main competitors 55
10.1.4 Barclays Plc – board of directors 56
10.2 HSBC Bank Plc – Company Overview 57
10.2.1 HSBC Bank Plc – profile 57
10.2.2 HSBC Bank Plc – main savings products 57
10.2.3 HSBC Bank Plc – main competitors 58
10.2.4 HSBC Bank Plc – board of directors 58
10.3 Lloyds Banking Group Plc – Company Overview 59
10.3.1 Lloyds Banking Group Plc – profile 59
10.3.2 Lloyds Banking Group Plc – main savings products 59
10.3.3 Lloyds Banking Group Plc – main competitors 59
10.3.4 Lloyds Banking Group Plc – board of directors 60
10.4 National Savings and Investments – Company Overview 61
10.4.1 National Savings and Investments – profile 61
10.4.2 National Savings and Investments – main savings products 61
10.4.3 National Savings and Investments – main competitors 61
10.4.4 National Savings and Investments – board of directors 62
10.5 Nationwide Building Society – Company Overview 63
10.5.1 Nationwide Building Society – profile 63
10.5.2 Nationwide Building Society – main savings products 63
10.5.3 Nationwide Building Society – main competitors 63
10.5.4 Nationwide Building Society – board of directors 64
10.6 Santander UK Plc – Company Overview 65
10.6.1 Santander UK Plc – profile 65
10.6.2 Santander UK Plc – main savings products 65
10.6.3 Santander UK Plc – main competitors 65
10.6.4 Santander UK Plc – board of directors 66
10.7 The Royal Bank of Scotland Group – Company Overview 67
10.7.1 The Royal Bank of Scotland Group Plc – profile 67
10.7.2 The Royal Bank of Scotland Group Plc – main savings products 67
10.7.3 The Royal Bank of Scotland Group Plc – main competitors 67
10.7.4 The Royal Bank of Scotland Group Plc – board of directors 68

11 Appendix 69
11.1 Methodology 69
11.2 Contact Timetric 69
11.3 About Timetric 69
11.4 Timetric’s Services 70
11.5 Disclaimer 71

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