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ISAs - UK - November 2016

Published By :

Mintel

Published Date : Nov 2016

Category :

Banking

No. of Pages : N/A

The ISA market is at a turning point. Overall contributions continue to grow driven by the stocks and shares sector of the market, but the number of accounts fell in the last tax year, as low interest rates undermine the incentive to save among many consumers. The introduction of the Personal Savings Allowance also poses a significant challenge for the ISA market, by undermining the main advantage offered over other savings products. However, the ISA market has an opportunity to service more long-term goals, through products like the Lifetime ISA.

Table of Contents

OVERVIEW
What you need to know
Products covered in this Report

EXECUTIVE SUMMARY
The market
Number of accounts continues to fall
Figure 1: Number of ISAs and amounts subscribed, 2009/10-2015/16
Growth forecast for cash ISA and stocks and shares ISA markets
Figure 2: Forecast of total adult cash ISA subscriptions, at current prices, 2010/11-2020/21
Figure 3: Forecast of total adult stocks and shares ISA subscriptions, 2010/11-2020/21
Personal tax allowance dis-incentivises ISA savings
Low rates drive interest in stocks and shares
Figure 4: Average monthly quoted cash ISA variable rate and fixed rate, January 2012-August 2016
Lifetime ISA set to launch in April 2017
Cross-selling is rife in the ISA market
Figure 5: Financial product ownership and cross-sales, July 2016
Companies and brands
High street banks and building societies dominate the cash ISA market
Figure 6: Ranking of cash ISAs providers, by proportion of ISA holders, April 2016
Fidelity is leading provider of ISA FUM
Figure 7: Top 10 investment ISA providers, by ISA funds under management, as of May 2016
Mixed approach towards Lifetime ISAs among providers
Innovative Finance ISA brings more firms into the market
The consumer
Nearly half of UK adults have an ISA
Figure 8: Savings product ownership, September 2016
Creating a savings ‘buffer’ is a priority…
Figure 9: Savings goals over the next five years, September 2016
but ISAs are preferred for longer-term goals
Figure 10: Planned use of ISA savings, September 2016
Offering guidance could increase consideration of risk-based products
Figure 11: Attitudes towards risk with savings and investments, September 2016
People like the idea of the Lifetime ISA…
Figure 12: Awareness and interest in Lifetime ISAs, September 2016
but the restrictions will put people off
Figure 13: Concerns about using a Lifetime ISA, September 2016
What we think

ISSUES AND INSIGHTS
Lifetime ISA could reduce contributions to pension savings
The facts
The implications
Simplifications undermined by launch of new ISAs
The facts
The implications
Personal Savings Allowance: the end of ISAs?
The facts
The implications

THE MARKET – WHAT YOU NEED TO KNOW
Number of accounts continues to fall
Growth forecast for cash ISA and stocks and shares markets
Personal tax allowance dis-incentivises ISA savings
Lifetime ISA set to launch in April 2017
Cross-selling is rife in the ISA market

MARKET SIZE AND FORECAST
Number of accounts subscribed to continues to fall
Figure 14: Number of ISAs and amounts subscribed, 2009/10-2015/16
Cash ISAs continue to hold greater share of the market
Figure 15: Number of ISAs and amounts subscribed, segmented by component type, 2009/10-2015/16
Stocks and shares see average subscription rise by 28%
Figure 16: Average subscription per account, 2009/10-2015/16
Stocks and shares ISAs see biggest rise for cash on deposit
Figure 17: Value of funds held in adult ISAs, by type of investment, 2012/13-2015/16
Cash ISA market forecast to reach £71.5 billion
Figure 18: Forecast of total adult cash ISA subscriptions, at current prices, 2010/11-2020/21
Figure 19: Forecast of total adult cash ISA subscriptions, at current prices, 2010/11-2020/21
Stocks and shares ISA market forecast to reach £30.9 billion
Figure 20: Forecast of total adult stocks and shares ISA subscriptions, 2010/11-2020/21
Figure 21: Forecast of total adult stocks and shares ISA subscriptions, 2010/11-2020/21
The impact of the EU Referendum vote
Figure 22: Post-Brexit alternative market scenarios for the value of total adult ISA subscriptions, at current prices, 2015/16-2020/21
Figure 23: Detailed Post-Brexit scenarios for the value of total adult ISA subscriptions, at current prices, 2015/16-2020/21
Forecast methodology

MARKET DRIVERS
Savings ratio continues to fall
Figure 24: Household savings ratio, Q1 2011-Q2 2016
Rising cost of living will affect people’s ability to save…
whilst low interest rates mean those who can lack an incentive
Figure 25: Bank of England base rate and CPI (monthly % change) – UK, January 2011-August 2016
Brexit vote has had little impact on confidence
Figure 26: Financial confidence index, January 2009-October 2016
Low rates drive interest in stocks and shares
Figure 27: Average monthly quoted cash ISA variable rate and fixed rate, January 2012-August 2016
Help to Buy terms cause confusion

REGULATORY AND LEGISLATIVE CHANGES
Personal tax allowance dis-incentivises ISA savings
Cash savings market study follow-up
Lifetime ISA set to launch in April 2017
Innovative Finance ISA investment range expanded
ISA annual subscription limit set to increase

CHANNELS TO MARKET
Cross-selling is rife in the ISA market
Figure 28: Financial product ownership and cross-sales, July 2016
People with a higher savings value present an opportunity for alternative providers
Figure 29: Cash ISA ownership and cross sales, by value of total savings and investments, July 2016
Investment experts preferred for stocks and shares

COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
High street banks and building societies dominate the cash ISA market
Mixed approach towards Lifetime ISAs among providers
ISA providers abandon new rules
ISA advertising spend rises for the first time since 2011/12

MARKET SHARE
High street banks and building societies dominate the market
Figure 30: Ranking of cash ISAs providers, by proportion of ISA holders, April 2016
Investors prefer specialist providers
‘Other’ providers increase share
Figure 31: Top 10 investment ISA providers, by ISA funds under management, as of May 2016

COMPETITIVE STRATEGIES
Mixed approach towards Lifetime ISAs among providers
Innovative Finance ISA brings more firms into the market
ISA providers abandon new rules
Improving personal financial management to increase savings

ADVERTISING AND MARKETING ACTIVITY
ISA advertising spend rises for the first time since 2011/12
Figure 32: Total above-the-line, online display and direct mail advertising expenditure on ISAs, by component type, 2011/12-2015/16*
Press no longer dominates adspend
Figure 33: Total above-the-line, online display and direct mail advertising expenditure on ISAs, by media type, 2015/16*
Cash ISA spend growth propelled by some key spenders
Figure 34: Top 10 recorded above-the-line, online display and direct mail advertisers of cash ISAs, 2011/12-2015/16
Aviva tops list for stocks and shares ISA spend
Figure 35: Top 10 recorded above-the-line, online display and direct mail advertisers of stocks and shares ISAs, 2011/12-2015/16
Nielsen Ad Intel coverage

THE CONSUMER – WHAT YOU NEED TO KNOW
Nearly half of UK adults have an ISA
Creating a savings ‘buffer’ is a priority…
but ISAs are preferred for longer-term goals
Offering guidance could increase consideration of risk-based products
People like the idea of the Lifetime ISA…
but the restrictions will put people off

SAVINGS PRODUCT OWNERSHIP
Nearly half of adults own an ISA
Figure 36: Savings product ownership, September 2016
Cash ISAs are the most popular form of ISAs
Stocks and shares ISAs are much less common
Figure 37: Savings product ownership, by value of savings and investments, September 2016
ISAs should be a first-choice savings product
Figure 38: Repertoire of different types of savings and investment product ownership, September 2016

GENERAL MOTIVATIONS FOR SAVING
Half are saving for emergencies/ unexpected events
Figure 39: Savings goals over the next five years, September 2016
Lifetime ISA will struggle to attract retirement savings
Stocks and shares ISAs more popular among those with longer-term savings goals
Figure 40: Savings goals over the next five years, by savings product ownership, September 2016

PLANNED USE OF ISA SAVINGS
ISAs used for a combination of short and long-term goals
Figure 41: Planned use of ISA savings, September 2016
Lifetime ISA could attract a significant proportion of ISA savings
Figure 42: Planned use of ISA savings, by age, September 2016
Stocks and shares ISAs dominated by retirement savings
Figure 43: Planned use of ISA savings, by ISA product ownership, September 2016
People would benefit from clarifying their ISA savings goals
Figure 44: Repertoire of planned use of ISA savings, September 2016

ATTITUDES TOWARDS RISK
Majority are unwilling to take risks with their savings
Figure 45: Attitudes towards risk with savings and investments, September 2016
Target financially confident Millennials
Figure 46: Agreement with the statement ‘I would be interested in taking more risk but need some guidance to do so’, by age, September 2016
Innovative Finance ISA will attract high-value savers
Figure 47: Agreement with the statement ‘I'm interested in exploring alternative finance products that could offer a better return (investing in peer-to-peer lending, crowdfunding)’, by value of savings, September 2016

ATTITUDES TOWARDS ISAS AND SAVING
Instant access is an important account feature
Figure 48: Attitudes towards ISAs and saving, September 2016
There is an opportunity to increase active ISA contributions
Figure 49: Attitudes towards ISAs and saving, by ISA product ownership, September 2016
Alternative ISA holders find them complicated
Low interest rates pose an opportunity for the stocks and shares market

AWARENESS AND EXPECTED USAGE OF THE LIFETIME ISA
The majority have heard of the Lifetime ISA
Figure 50: Awareness and interest in Lifetime ISAs, September 2016
24-27-year-olds are a prime target
Figure 51: Awareness and interest in Lifetime ISAs, by age, September 2016
Providers need to communicate benefits among the self-employed
Figure 52: Awareness and interest in Lifetime ISAs, by working situation, September 2016

ATTITUDES TOWARDS LIFETIME ISAS
Lifetime ISA provides cross-selling opportunity
Figure 53: Attitudes towards Lifetime ISAs, September 2016
Is it appropriate to save for a home and retirement together?
Lifetime ISAs pose a threat to pension contributions…
Figure 54: Considerations for savings in a Lifetime ISA, September 2016
but the restrictions will be off-putting for many
Figure 55: Concerns about using a Lifetime ISA, September 2016

APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology

APPENDIX – VALUE OF SAVINGS
Figure 56: Value of savings and investments, September 2016

APPENDIX – MARKET SIZE AND FORECAST
Best- and worst-case forecasts for cash ISA subscription value
Figure 57: Best- and worst-case forecasts for total adult cash ISA subscriptions, at current prices, 2015/16-2020/21
Best- and worst-case forecasts for stocks and shares ISA subscription value
Figure 58: Best- and worst-case forecasts for total adult stocks and shares ISA subscriptions, at current prices, 2015/16-2020/21
Cash ISA volume forecast
Figure 59: Market forecast for number of adult cash ISA subscriptions, 2010/11-2020/21
Figure 60: Best- and worst-case forecasts for total number of adult cash ISA subscriptions, 2015/16-2020/21
Stocks and Shares ISA volume forecast
Figure 61: Market forecast for number of adult stocks and shares ISA subscriptions, 2010/11-2020/21
Figure 62: Best- and worst-case forecasts for number of adult stocks and shares ISA subscriptions, 2015/16-2020/21
Forecast Methodology

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