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ISAs - UK - September 2014

Published By :

Mintel

Published Date : Sep 2014

Category :

Banking

No. of Pages : 110 Pages

ISA providers should embrace the new ISA reforms and ensure that they can offer consumers the maximum amount of flexibility that the new ISA rules can afford. The traditional line between cash and stocks and shares ISA providers is now blurred. Cash ISAs should begin looking at offering consumers a simple range of investment options, and stocks and shares providers need to consider the rates of interest that they pay on cash.
Table of Content

Introduction

Product definitions
Abbreviations

Executive Summary

The market
The ISA market is expected to grow over the next five years, aided by the 2014 Budget changes
Figure 1: Forecast of total adult ISA subscriptions, at current prices – fan chart, 2008/09-2018/19
OEICs and Unit Trusts grow in popularity
Market factors
The 2014 Budget will shake up the savings, investments and pensions industry
Falling savings ratio has hit cash savings
The FLS and BoE base rate continue to keep ISA interest rates at rock bottom
Increasing numbers of ISAs are sold directly online
Other recent market developments
Companies, brands and innovation
The largest banks dominate the cash ISA market
Figure 2: Providers’ market share based on total retail savings balances, shown on a group basis, UK, 2013
St.James’s Place becomes the largest unit trust/OEIC ISA provider
Figure 3: Top ten unit trust/OEIC ISA providers, by value of funds under management, May 2014
Adspend for cash ISAs continues to decrease as adspend on stocks and shares ISAs increases
The consumer
A quarter of adults have an instant access cash ISA
Figure 4: Ownership of savings and investment products, June 2014
31% simply opted for the ISA that their current account provider was offering
Figure 5: Reasons to choose an ISA Provider, June 2014
Around a quarter of consumers use their ISA for unexpected events
Figure 6: Uses for ISA savings or investments, June 2014
Half of all ISA holders are happy with their existing provider
Figure 7: Attitudes towards ISAs, June 2014
Instant access is the key attraction, even at the cost of interest payments
Figure 8: Preferences of types of cash ISA accounts, June 2014
What we think

Issues and Insights

NISA flexibility will make consumers more willing to dabble in stocks and shares
The facts
The implications
ISAs will complement, not compete with pensions, despite pension reforms
The facts
The implications
Few consumers will be able to take full advantage of the new ISA allowance
The facts
The implications

Trend Application

Giving consumers the flexibility to meet unexpected costs and save for the future
Nudging consumers towards better savings habits
Mintel futures: Generation Next

Market Drivers

Key points
2014 Budget changes
ISA changes
Changes to annuities
Savings ratio is falling as consumer confidence picks up
Figure 9: Annual savings ratio, Q1 2008 – Q1 2014
Retail deposits continue to grow modestly to mid-2014
Figure 10: Retail savings balances, by sector, 2005-14
FLS will contribute towards low rates for another two-and-a-half years
Child Trust Funds will be allowed to be transferred to Junior ISAs
The Cash Savings Market Study investigates competition in the cash ISA market
Low base rate and inflation continue to hurt savers
Figure 11: Bank of England base rate, CPI and RPI – UK, January 2006- June 2014
Cash ISA rates continue to decrease and remain lower than inflation
Figure 12: Average monthly quoted cash ISA variable rate and fixed rate, January 2011-May 2014
Global stock markets recover to pre-recession levels
Figure 13: Performance of FTSE 100, Nikkei 225 and S&P 100, January 2003-August 2014

Who’s Innovating?

Key points
HSBC launches loyalty range of cash ISAs and ends teaser rates
Nationwide launches simple investment range
Sun Life Direct to launch £10 per month ISA
James Hay launch modular ISA

Market Size and Forecast

Key points
The number of ISAs subscribed to decreased in 2013/14
Figure 14: Number of ISAs and amounts subscribed, 2005/06-2013/14
Low cash interest rates increase the appeal of equities, at the expense of cash savings
Figure 15: Number of ISAs and amounts subscribed, segmented by component type, 2005/06-2013/14
The new £15,000 annual allowance will boost average subscription amounts
Figure 16: Average subscription per account, 2008/09-2013/14
OEICs and Unit Trusts grow in popularity
Figure 17: Value of funds held in adult ISAs, by type of investment, 2012-14
The ISA market is expected to grow, aided by the 2014 Budget changes
Figure 18: Forecast of total adult ISA subscriptions, at current prices – fan chart, 2008/09-2018/19
Figure 19: Forecast of total adult ISA subscriptions, 2013/14-2018/19
Figure 20: Forecast of new adult ISA business, by component at current prices, 2013/14-2018/19
Forecast methodology
Fan chart explanation

Market Share

Key points
The largest banks dominate the cash ISA market
Figure 21: Ranking of the largest providers of cash ISAs and other savings accounts, by proportion of customers, January 2014
Lloyds Banking Group dominated retail customer deposit balances in 2013
Figure 22: Providers’ total retail savings balances, shown on a group basis – UK, 2011-13
St James’s Place becomes the largest unit trust/OEIC ISA provider
Figure 23: Top ten unit trust/OEIC ISA providers, by value of funds under management, 2012-14
Unit trust and OEIC ISA sales increased in the last tax year
Figure 24: Net retail unit trust/OEIC ISA sales, 2007/08-2013/14

Companies and Products

Lloyds Banking Group
Figure 25: Lloyds Banking Group cash ISA range, July 2014
Figure 26: Key annual financial data for Lloyds Banking Group, 2012 and 2013
Santander
Figure 27: Santander’s ISA product range, July 2014
Figure 28: Key annual financial data for Santander UK, 2011-13
Nationwide
Figure 29: Nationwide’s cash ISA product range, July 2014
Figure 30: Key financial data for Nationwide Building Society, 2013 and 2014
St. James’s Place (SJP)
Figure 31: Key financial data for St.James’s Place plc

Brand Communication and Promotion

Key points
Adspend on cash ISAs continues to fall
Figure 32: Total advertising expenditure on ISAs, by component type, 2009/10-2013/14
The Post Office became the largest ISA advertiser in 2014
Figure 33: Top ten advertisers of cash ISAs, 2012-14
Scottish Friendly became the largest stocks and shares ISA advertiser in 2014
Figure 34: Top ten advertisers of stocks and shares ISAs, 2012-14

Channels to Market

Key points
Online channels are increasingly popular in researching, applying for and managing cash ISAs
Figure 35: Preferences for retail banking channels, by ownership of different types of savings accounts, January 2014
Fund platforms accounted for the majority of fund sales in ISAs
Figure 36: Gross retail ISA OEIC and unit trust sales, by distribution channel, 2013/14

Ownership of ISAs

Survey background
Key points
Having instant access appealing to consumers
Figure 37: Ownership of ISAs and other savings and investment products, June 2014
Savings accounts are easier for consumers to understand than ISAs
Stocks and shares ISAs are the most popular way to hold investments
A large proportion of consumers have no savings or investments
An older, more affluent customer base
Figure 38: Ownership of ISAs, by demographics, June 2014

Reasons to Choose an ISA Provider

Key points
A third of ISA holders took out an ISA from their bank account provider
Figure 39: Reasons to Choose an ISA Provider, June 2014
Stocks and shares ISA holders are less likely to use their current account provider
Recommendations not decisive in helping consumers choose their ISA provider
Loyalty rates succeed in encouraging 17% of consumers to choose their ISA provider
Figure 40: Reasons to choose an ISA provider, by reasons to choose an ISA provider, June 2014
Four out of ten ISA holders chase the best interest rate
ISA holders also look for a well-known brand and good customer service

Uses for ISA Savings or Investments

Key points
The most popular use for ISA savings/investments is to fund retirement
Figure 41: Uses for ISA savings or investments, June 2014
Around a quarter use their ISA to pay for emergencies or unexpected events
A fifth of ISA holders use their account to grow their wealth
Unstructured saving can prevent consumers from building up their savings

Attitudes towards ISAs

Key points
Over half of ISA holders are happy with their ISA
Figure 42: Attitudes towards ISAs, June 2014
Twice as many ISA holders contribute ad hoc as contribute regularly
Figure 43: Attitudes towards ISAs, by ownership of ISAs, June 2014
Changes to the ISA allowance will only benefit wealthier ISA holders
Only 38% of cash ISA holders are investing to take advantage of the tax benefits

Preferences for Types of ISA Savings Accounts

Key points
Low interest easy access ISAs are the most popular among consumers
Figure 44: Cash ISA account preferences
17% of consumers are prepared to lock their money away for 5 years
A fifth of consumers don’t know what they want
Figure 45: Preferences of types of ISA savings accounts, by demographics, June 2014

Appendix – Market Size and Forecast

Total market forecast – best- and worst-case scenarios
Figure 46: Value of new adult ISA subscriptions – best- and worst-case scenarios, at current prices, 2013/14-2018/19
Market forecast by sector
Figure 47: Value and volume of new adult ISA subscriptions, by component, at current prices, 2008/09-2018/19
Cash ISA forecast
Figure 48: Forecast of cash ISA subscriptions, at current prices – fan chart, 2008/09-2018/19
Figure 49: Forecast of cash ISA subscriptions, 2013/14-2018/19
Figure 50: Forecast of cash ISA subscriptions – best- and worst-case scenarios, at current prices, 2013/14-2018/19
Stocks and shares forecast
Figure 51: Forecast of stocks and shares ISA subscriptions, at current prices – fan chart, 2008/09-2018/19
Figure 52: Forecast of stocks and shares ISA subscriptions, 2013/14-2018/19
Figure 53: Forecast of stocks and shares ISA subscriptions – best- and worst-case scenarios, at current prices, 2013/14-2018/19
Forecast methodology
Fan chart explanation

Appendix – Ownership of ISAs

Figure 54: Ownership of ISAs, by demographics, June 2014
Figure 55: Ownership of ISAs, by demographics, June 2014
Figure 56: Ownership of ISAs, by demographics, June 2014

Appendix – Reasons to Choose an ISA Provider

Figure 57: Reasons to choose an ISA provider, by demographics, June 2014
Figure 58: Reasons to choose an ISA provider, by demographics, June 2014
Figure 59: Reasons to choose an ISA provider, by demographics, June 2014

Appendix – Uses for ISA Savings or Investments

Figure 60: Uses for ISA savings or investments, by demographics, June 2014
Figure 61: Uses for ISA savings or investments, by demographics, June 2014

Appendix – Attitudes towards ISAs

Figure 62: Attitudes towards ISAs, by demographics, June 2014
Figure 63: Attitudes towards ISAs, by demographics, June 2014
Figure 64: Attitudes towards ISAs, by demographics, June 2014

Appendix – Preferences for Types of ISA Savings Accounts

Figure 65: Preferences for types of ISA savings accounts, by demographics, June 2014

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