Table of Contents
Introduction and Abbreviations
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- Scope of the report
- Mintel’s exclusive consumer survey on ISAs
- Market definitions
- Other reports of relevance
- Key Sources
- Global information and research
- Consumer research
- ACORN
- Abbreviations
Premier Insight
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- Narrow the ISA gap
- Improve targeting of the 25-44 age group
- Strip out the jargon
- Educate consumers
- Provide greater flexibility
- More incentives needed to hold investments in ISAs
Executive Summary
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- Recent developments
- Market factors
- Size of the ISA market
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- Figure 1: ISA penetration, by type of ISA, March 2006
- Demand for equity ISAs picked up in 2005/06
- Competitive environment
- Cash ISA market
- Unit trust/OEIC ISA market
- Distribution
- Advertising activity
- The key findings of Mintel’s consumer research
- The ISA gap
- Profile of the ISA holder
- Investment behaviour
- Consumer attitudes
- Market outlook
- In conclusion
Market Background
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- What is an ISA?
- ISA types: mini and maxi
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- Figure 2: Illustration of annual investment limits, from April 2005 onwards
- Eligibility criteria
- Two components, but a wide choice of investments
- Recent additions: property funds
- Do-it-yourself with self-select ISAs
- Cash ISAs are by far the most popular
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- Figure 3: Net retail unit trust/OEIC sales and proportion represented by ISAs, 2000-05
- Tax benefits and removal of the 10% tax credit on dividends
- TOISAs
- Stakeholder ISAs
- Stakeholder conditions
- ISA mortgages
Market Factors
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- Demand for credit relaxes slightly...
- ...while saving activity picks up...
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- Figure 4: Total PDI, consumer expenditure and savings (at constant prices) and the savings ratio, at current prices, 2002-10
- ...as indicated by the real growth in personal sector savings
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- Figure 5: Annual personal sector savings per capita, at current and constant prices, 2002-10
- Interest rates may be low...
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- Figure 6: Changes in the bank base interest rate, May 1992-May 2006
- ...but so too is inflation
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- Figure 7: Changes in the bank base rate, retail price index and consumer price index, 1998-2006
- Stockmarket setback
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- Figure 8: FTSE 100 and FTSE All Share – daily index movements, May 1999-May 2006
- A growing pool of taxpayers are paying 40% income tax
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- Figure 9: Number of basic and higher-rate taxpayers, 1999/2000-2005/06
- Expanding ABC1 population is good news for ISA providers
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- Figure 10: Distribution of the UK adult population, by socio-economic group, 1998-2010
- Major ISA buyers, the over-45s are also growing in number
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- Figure 11: Size of the UK population, by age group, 1998-2010
Market Size and Trends
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- Overall ISA penetration stands at 31%
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- Figure 12: ISA market penetration, by type, March 2006
- Cash component accounts for two thirds of the total funds held in ISAs
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- Figure 13: Value of funds held in each of the three ISA components, 2000-05
- Unit trust and OEICs are the most popular investments to hold in an equity ISA
- 2005/06 is set to be the best year so far for new ISA business
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- Figure 14: New mini and maxi ISAs opened and amounts subscribed, 2000/01-2005/06
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- Figure 15: Total amounts subscribed in mini and maxi ISAs, at current and constant prices, 2000/01-2005/06
- Solid growth in mini equity ISAs in 2005/06, albeit from a small base
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- Figure 16: New mini ISAs opened and amounts subscribed, by type, 2000/01-2005/06
- Average mini equity subscription is much lower than the cash equivalent...
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- Figure 17: Average subcription per mini ISA, by type, 2000/01-2005/06
- ...but both fall short of the maximum allowed
- Substantial scope to increase market penetration
- The equity component accounts for 98% of amounts invested in maxi ISAs
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- Figure 18: Amounts invested in maxi ISAs, by component type, 2000/01-2005/06
- Average maxi ISA subscription rises 9% in 2005/06
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- Figure 19: Average subcription per maxi ISA, 2000/01-2005/06
- The end of the road for matured TESSA business
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- Figure 20: Amounts subscribed from matured TESSAs into ISAs and number of TOISAs opened, 2000/01-2004/05
Key Players and the Competitive Environment
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- HBOS tops the cash ISA rankings
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- Figure 21: Provider share of mini cash ISA customer base, March 2006
- Banks dominate the cash ISA market
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- Figure 22: Share of ISA balances outstanding (cash component only), by main type of provider, March 2006
- Best cash ISA rates tend to be offered by building societies
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- Figure 23: Highest-paying cash ISAs with a minimum balance of £10, May 2006
- Product differentiation
- Legal & General is the largest unit trust/OEIC ISA fund manager
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- Figure 24: Largest unit trust/OEIC ISA fund managers, by assets, 2004-06
Distribution and the Internet
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- Cash ISAs are mainly sold directly...
- ...whereas equity ISAs often require expert advice
- The ISA customer base records above-average Internet penetration
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- Figure 25: Internet penetration and online activity, by ISA holders, March 2006
- Sales of unit trust and OEIC ISAs via fund supermarkets grow strongly
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- Figure 26: Gross retail sales of unit trust and OEIC ISAs, by distribution channel, 2000-05
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- Figure 27: Proportional representation of unit trust and OEIC ISA sales, by distribution channel, 2000-05
- The emergence and growing significance of fund supermarkets
Advertising and Promotion
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- ISA adspend increased by 9% in 2005/06
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- Figure 28: Total advertising expenditure on ISAs, by product category, 2001/02-2005/06
- ISA promoters focus activity on the press and direct mail
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- Figure 29: Proportional distribution of adspend on ISAs, by main media, 2001/02-2005/06
- Legal & General maintains position as largest ISA advertiser
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- Figure 30: Top ten ISA advertisers, 2001/02-2005/06
Consumer Financial Activity
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- About the Financial Activity Bulletin
- Small improvement in consumer confidence...
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- Figure 31: The five measures comprising the consumer confidence index, Q1 2004-Q1 2006
- ...but financial activity levels look set to fall slightly
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- Figure 32: Savings, investment, borrowing and debt repayment – consumers’ expected activity, December 2004-March 2006
- C2s will display higher than average financial activity levels
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- Figure 33: Expected financial activity, by socio-demographic and income groups, March 2006 and average for the last 17 quarters
- ISA season will be fruitful for providers
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- Figure 34: Leading financial activities planned in the next six months, March 2005-March 2006
- Slower activity ahead for the property market
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- Figure 35: Intended mortgage and property purchase activity, March 2004-March 2006
- Lloyds TSB sees its position weaken slightly
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- Figure 36: Leading main financial services providers’ market shares, March 2005-March 2006
- Nationwide will benefit most from strong ISA demand
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- Figure 37: Saving, investment and lending market sizes, by expected customer demand and brand leaders (overall % intending to undertake activity in brackets), March 2006
- Bank of Scotland and RBS will have the most active customer bases
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- Figure 38: Activity levels of main financial services providers’ customer bases, March 2006
- RBS customers looking to save more
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- Figure 39: Activity intentions and current household financial situation, by top ten providers, March 2006
The Consumer and Product Ownership
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- Nearly a third of adults have an ISA product
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- Figure 40: Ownership of selected savings and investment products, March 2006
- Three fifths of cash savers are not using their ISA allowance
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- Figure 41: Cross-analysis of savings and investment product ownership, March 2006
- Half of all ABs have an ISA
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- Figure 42: Ownership of ISAs and other savings/investment types, by gender, age and socio-economic group, March 2006
- ISAs also find favour with third agers and retirees
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- Figure 43: Ownership of ISAs and other savings/investment types, by marital status, lifestage, Mintel’s Special Groups and tenure, March 2006
- Ownership is skewed towards the wealthy
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- Figure 44: Ownership of ISAs and other savings/investment types, by working status, gross annual household income, region and ACORN category, March 2006
- Supermarket banks offer distribution opportunities
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- Figure 45: Ownership of ISAs and other savings/investment types, by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, March 2006
- 35-44-year-olds are under-represented in the cash ISA market
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- Figure 46: Profile of ISA holders, by gender, age, socio-economic group and region, March 2006
- Banks have the larger share of the cash ISA customer base...
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- Figure 47: Type of provider obtained cash ISA from, March 2006
- ...but building societies are better at targeting ABC1s and the over-45s
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- Figure 48: Customer profile of the main types of cash ISA provider, by gender, age and socio-economic group, March 2006
- Merely a third of cash ISA savers invest the maximum allowed
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- Figure 49: Agreement with statements about ISA usage, by type of ISA held, March 2006
- Building societies benefit most from recurring subscription business
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- Figure 50: Agreement with statements about ISA usage, by type of provider (cash ISA holders only), March 2006
- Two thirds of those who use their total cash ISA allowance in 2005/06 intend to do the same in 2006/07
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- Figure 51: Agreement with statements about ISA usage, by those who have used this year’s cash ISA allowance and those who are saving for a particular reason, March 2006
- Men and ABC1s are the most active ISA investors
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- Figure 52: Agreement with statements about ISA usage, by gender and socio-economic group, March 2006
- Over-55s more likely to have the funds to invest the max
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- Figure 53: Agreement with statements about ISA usage, by age group, March 2006
- Two fifths of adults are not keen on giving the taxman money needlessly
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- Figure 54: Agreement with general statements about ISAs, saving and investing, March 2006
- Broadsheet readers and Internet users record a strong propensity to shop around for the best deal
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- Figure 55: A summary of the key target groups for each statement, March 2006
- Further analysis
Consumer Attitudes and Targeting Opportunities
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- Just over half of all ISA holders mistakenly believe the minimum age to open a cash ISA is 18
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- Figure 56: Results of the ISA knowledge test – total sample versus ISA holders, March 2006
- Some 37% of adults are ISA Ignorant
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- Figure 57: Breakdown of total sample based on results of ISA knowledge test, March 2006
- Half of non-ISA subscribers are ISA Ignorant
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- Figure 58: Comparison of test results between ISA holders and non-ISA holders, March 2006
- ISA knowledge gap afflicts a broad spectrum of society
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- Figure 59: ISA knowledge test results, by gender, age and socio-economic group, March 2006
- CHAID analysis
- What is CHAID analysis?
- The main target groups identified
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- Figure 60: Target groups identified for the ISA market, March 2006
- A quarter of adults possess no savings or investment product...
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- Figure 61: Number of savings or investment product types held, March 2006
- ...and nearly half of them are under the age of 35
- ISA penetration rises with the number of investment products held
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- Figure 62: Ownership of selected savings and investment products, by number of types held, March 2006
- A quarter of ABs have four or more savings products
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- Figure 63: Number of savings or investment product types held, by gender, age and socio-economic group, March 2006
- Cluster analysis
- What is cluster analysis?
- ISA clusters
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- Figure 64: ISA clusters, March 2006
- Non-/Basic Savers
- Potential ISA Targets
- Major ISA Targets
- Detailed cluster composition
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- Figure 65: Agreement with general statements about ISAs, saving and investing, by ISA clusters, March 2006
- Three in five major targets have a mini cash ISA
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- Figure 66: Ownership of selected savings and investment products and number of types held, by ISA clusters, March 2006
- Much ‘Room for Improvement’ among Major ISA Targets
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- Figure 67: ISA knowledge test results, by cluster, March 2006
- Non-/Basic Savers are biased towards the younger age groups
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- Figure 68: ISA clusters, by gender, age and socio-economic group, March 2006
- Two fifths of ABC1 families are Potential ISA Targets
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- Figure 69: ISA clusters, by marital status, lifestage, Mintel’s Special Groups and tenure, March 2006
- High income groups are most likely to be Major ISA Targets
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- Figure 70: ISA clusters, by working status, gross annual household income, region and ACORN category, March 2006
- Mid-market tabloid and broadsheet readers have a strong propensity to be Major ISA Targets
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- Figure 71: ISA clusters, by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, March 2006
Industry Views
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- About the respondents
- Closing the ISA gap
- The future of ISAs
- Tempting back ISA investors
- The next 12 months
The Future
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- Huge scope for market expansion...
- ...but the government and the industry must narrow the gap
- Government must give long-term commitment to ISAs
- Improving savings backdrop...
- ...but the recent dip in share prices could dampen investors’ appetite for equities
- Property funds will continue to be in demand
Forecast
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- Number of new mini accounts will continue to mount...
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- Figure 72: Forecast of the number of mini and maxi ISAs opened, 2005/06-2010/11
- ...and an improving savings environment will help lift ISA subscriptions
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- Figure 73: Forecast of the amounts subscribed to mini and maxi ISAs, 2005/06-2010/11
- Factors incorporated
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