Table of Contents
Introduction and Abbreviations
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- ISA products ‘develop’ in 2005
- Report contents
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
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- Older people are key targets for ISA providers
- Do not under use the tax incentive
- Opportunities exist to acquire new customers
- Use internal ISA knowledge to promote pension products
- Use timed investment promises to draw in younger people
- Branches are key to buoyant ISA sales
Executive Summary
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- Consumer confidence increases
- The stock market is performing relatively well
- The number of mini ISA subscribers rises in 2004/05
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- Figure 1: Value of mini and maxi ISA business, 2000/01-2004/05
- Building societies are the largest distributors
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- Figure 2: Distribution of mini and maxi ISAs, by type of provider, 2004
- Fund managers provide more than a tenth of accounts
- Rainy days and retirement provision encourage ISA sales
- Providers have many views on how to encourage sales
Background and Definitions
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- ISA investment limits and product types
- Life insurance is merged with stocks and shares
- Saving is favoured by the majority
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- Figure 3: Scale of risk, May 2005
- Interest rates excite consumer interest
- Tax appeal
- ISA mortgages
- Stakeholder ISAs come with conditions
- Investment fund options
- Equity investments have declined
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- Figure 4: Fund managers, percentage of total funds (retail and institutional) under management, by asset class, 2000 and 2004
- Depolarisation will partially modify the structure of ISA sales
Market Drivers
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- The psychology of ISAs
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- Figure 5: ISA subscriber types, May 2005
- Portfolio life
- Least confident consumers are those earning £14,499 or under
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- Figure 6: Consumer confidence, by income band, July 2002-March 2005
- Use low base rates to encourage investment in managed high-risk options
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- Figure 7: Base rate, January 1992 to April 2005
- Some people will have more discretionary funds to invest in ISAs
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- Figure 8: PDI, consumer expenditure and savings ratio, at current prices, 1999-2009
- Savings per capita have decreased over the last five years
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- Figure 9: Gross savings per capita and household savings ratio, 2000-04
- Sustained stockmarket improvement will increase the appeal of medium- to high-risk products
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- Figure 10: Daily changes in the FTSE100 and FTSE All Share indices, January 1996-March 2005
- Removal of tax credit dividends may cause an unfavourable reaction among consumers
- Raising one limit does not seem to have satisfied providers
- A government deficient in a national savings strategy
Market Size
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- The market is fairly stable at the moment but…
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- Figure 11: Mini and maxi ISA business, 2000/01-2004/05
- …things could change as a result of some tricky issues
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- Figure 12: Issues affecting the future of the ISA market, May 2005
- Comparable figures show that mini ISA business has improved
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- Figure 13: Number of mini and maxi ISAs opened in tax year and amounts subscribed, 2000/01-2004/05
- Cash ISA sales are a major influence on the market
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- Figure 14: Number of mini ISAs opened during tax year, by type, 2000/01-2004/05
- Sales of mini stocks and shares ISAs will rebound
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- Figure 15: Amounts subscribed during tax year, by type of mini ISA, 2000/01-2004/05
- The average mini cash ISA contribution was £2,200 in 2004/05
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- Figure 16: Average subscription amount per mini ISA, by type, 2000/01-2004/05
- A slowdown in the housing market could encourage maxi investment
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- Figure 17: Amounts subscribed during year, by component of maxi ISA, and average subscription per account, 2000/01-2004/05
- TOISA business is in decline
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- Figure 18: Amounts subscribed from matured TESSAs into ISAs and number of TESSA-only ISAs, 2000/01-2003/04
- Promotion and product suitability
- Cash on deposit funds show highest value
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- Figure 19: Illustration of market value, top funds held in ISAs, by type of component, 2000-04
- The total market value of ISA funds rose by 340% between 2000 and 2004
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- Figure 20: Market value of funds held in ISAs, by type of component, 2000-04
Key Players
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- Nearly half of ISAs are provided through a building society
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- Figure 21: Percentage of subscribers, by provider type, 2004
- Distribution of maxi ISAs has risen through building societies
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- Figure 22: Distribution of mini and maxi ISAs, by type of provider and product type, 2003 and 2004
- Building societies continue to do well in the savings market
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- Figure 23: Largest building societies, by assets and number of branches, tax year 2004/05
- Large branch networks enable banks to offer ISAs to an extensive customer base
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- Figure 24: Largest banks, by assets and number of branches, 2003
- Fidelity Investments manages the largest sum of funds
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- Figure 25: Investment managers, by funds under management, March 2005
- Insurance companies
- Retailers offer consumers a unique purchasing experience
Distribution
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- The highest proportion of subscribers live in the South East
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- Figure 26: Individuals subscribing to ISAs, by government office region and product type, 2001/02
- The majority of cash ISAs are sold directly
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- Figure 27: Cash ISA sales, by distribution channel, 2004/05
- Stocks and shares investments have declined over the last few years
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- Figure 28: Stocks and shares ISA sales, by distribution channel, 1999-2004
- Quarterly comparison shows unallocated sales have risen by 6%
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- Figure 29: Quarterly comparison of stocks and shares ISA sales, by distribution channel, 2004 Q1 and 2005 Q1
- Discover how intermediaries perceive the market
Advertising and Promotion
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- The ISA season
- Extend the proposition
- At the start of the 2005/06 season an AER of 5.4% appears to be competitive
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- Figure 30: Examples of mini cash ISA promotion features, by description, AER, approach and minimum investment, May 2005
- Safer options receive more advertising support from providers
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- Figure 31: Advertising expenditure, by product sub-category, 2004
- Year-on-year total ISA advertising expenditure has risen slightly
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- Figure 32: Distribution of total ISA advertising expenditure, by outlet type, 2002-04
- Fund managers account for the lion’s share of advertising expenditure
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- Figure 33: ISA providers, by advertising expenditure, 2004
Consumer Financial Activity
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- Consumers are looking to refresh their finances
- Relationship with the main financial services providers
- Activity levels set to rise in the six months from March 2005
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- Figure 34: Savings, investment, borrowing and debt repayment – consumers’ expected activity, December 2003-March 2005
- Those aged 30-39 will be most active over the next few months
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- Figure 35: Expected financial activity, by socio-demographic and income groups, March 2005 and average for the last 13 quarters
- Consumers looking to build up savings
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- Figure 36: Leading financial activities planned in the next six months, March 2004-March 2005
- Mixed messages on housing activity
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- Figure 37: Intended mortgage and property purchase activity, December 2002-March 2005
- Lloyds TSB increases leading market share position
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- Figure 38: Leading main financial services providers: market shares, March 2004-March 2005
- RBS and Nationwide should boost their savings business
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- Figure 39: Saving, investment and lending, market sizes, by expected customer demand and brand leaders (overall % intending to undertake activity in brackets), March 2005
- Bank of Scotland has the most ‘active’ customers
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- Figure 40: Activity levels of main financial providers’ customer bases, March 2005
The Consumer
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- Propensity to hold an ISA increases with age
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- Figure 41: ISA ownership, by gender, age, socio-economic group, marital status and lifestage, March 2005
- Implications
- Special Group ABC1 55+ are good promotional targets
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- Figure 42: ISA ownership, by working status, gross annual household income, TV region and Mintel’s Special Groups, March 2005
- Implications
- Continue to allocate relatively high advertising expenditure to press promotions
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- Figure 43: ISA ownership, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, March 2005
- Implications
- The prospect of rainy days encourages saving
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- Figure 44: Reasons for saving, March 2005
- Young people are fair targets for ISA providers
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- Figure 45: Reasons for saving, by gender, age, socio-economic group, marital status and lifestage, March 2005
- Implications
- Part-time workers more likely to save to travel
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- Figure 46: Reasons for saving, by working status, gross annual household income, TV region and Mintel’s Special Groups, March 2005
- Implications
- Offer a multitude of promotional materials
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- Figure 47: Reasons for saving, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, March 2005
- Implications
- Some 53% of stocks and shares holders are saving for retirement
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- Figure 48: Cross-analysis of reasons for saving, by type of ISA, March 2005
- Some 23% of consumers favour ISAs compared with ordinary savings accounts
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- Figure 49: Agreement with selected statements, March 2005
- Implications
- ABs will use the Internet if they can obtain a better deal
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- Figure 50: Agreement with selected statements, by gender, age, socio-economic group, marital status and lifestage, March 2005
- Implications
- Londoners would like to know more about ISAs
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- Figure 51: Agreement with selected statements, by working status, gross annual household income, TV region and Mintel’s Special Groups, March 2005
- Implications
- Broadsheet newspapers are a key advertising channel for providers
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- Figure 52: Agreement with selected statements, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, March 2005
- Implications
- Most agree that mini ISAs are better than ordinary savings accounts
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- Figure 53: Agreement with statements, by type of ISA, March 2005
Consumer Attitudes and Targeting Opportunities
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- Minimising tax is the major motivator for subscribers
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- Figure 54: Motivations for investing in an ISA, March 2005
- Younger people are motivated by medium-term profits
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- Figure 55: Top motivations for investing in an ISA, by gender, age and socio-economic group, March 2005
- Implications
- Unmarried people favour longer-term investments
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- Figure 56: Top motivations for investing in an ISA, by marital status, lifestage and ACORN category, March 2005
- Implications
- Londoners are more likely to use ISAs to minimise tax outlay
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- Figure 57: Top motivations for investing in an ISA, by working status, gross annual household income, TV region and Mintel’s Special Groups, March 2005
- Implications
- In some cases shopping preferences transfer to finance choices
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- Figure 58: Top motivations for investing in an ISA, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, March 2005
- Implications
- ISA providers – do not close your branches
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- Figure 59: Major factors influencing ISA provider choice, by gender, age and socio-economic group, March 2005
- Implications
- Branches connect with people on low-to-moderate incomes
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- Figure 60: Major factors influencing ISA provider choice, by marital status, lifestage and ACORN category, March 2005
- Implications
- Use family connections to encourage product take-up
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- Figure 61: Major factors influencing ISA provider choice, by working status, gross annual household income, TV region and Mintel’s Special Groups, March 2005
- Implications
- IFA services appeal to broadsheet readers
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- Figure 62: Major factors influencing ISA provider choice, by new technology users, newspaper readership, commercial TV viewing and supermarket usage, March 2005
- Implications
- IFAs offer providers an established link with share ISA subscribers
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- Figure 63: Major factors influencing ISA provider choice, by type of ISA product, March 2005
- Implications
- Consumer typologies
- People aged 45-64 and ABs are the best consumer targets
- Some groups show disillusionment with ISAs
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- Figure 64: Key targets for ISA providers, by gender, age, socio-economic group, lifestage and TV region, March 2005
- Most typologies have some savings motivations
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- Figure 65: Number of motivations to save, by typology groups, March 2005
- Experience motivated by home, family and retirement
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- Figure 66: Motivations to save, by typology groups, March 2005
- ISAs to clear younger adults’ debts
- Barclays’ customers slightly more likely to be among warm targets
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- Figure 67: Bank profiles, by typology groups, March 2005
- NatWest to stress ISA benefits to lapsed owners
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- Figure 68: Main bank account provider, by typology groups, March 2005
- Sainsbury’s well placed to pick up on ISA owners
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- Figure 69: Supermarket customer profiles, by typology groups, March 2005
- Sainsbury’s is well represented
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- Figure 70: Grocery shopping profiles, by typology groups, March 2005
Industry Views
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- Advertising expenditure
- Market development
- Internet distribution
- Intermediary distribution
- Direct distribution
- Product issues
The Future
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- Expectant providers await government decisions in the 2005/06 tax year
- Pensions activity could affect other savings products
- Rising consumer expenditure will encourage saving and investing
- Depolarisation will change bank distribution
- The appeal of stockmarket investments will increase
- Neither a lender nor a borrower be – economic swing could affect ISA sales
- The government is unlikely to raise ISA limits
Forecast
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- Figure 71: Forecast of amounts subscribed, mini and maxi ISAs, 2004/05-2009/10
- Rates of decline are slower
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- Figure 72: Forecast of mini and maxi accounts opened, 2004/05-2009/10
- Forecast notes
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