Table of Contents
Issues in the Market
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- Report coverage
- Key issues
- Market definitions
- The main types of ISA product
- Stakeholder ISAs
- Abbreviations
Insights and Opportunities
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- Scope to expand the market further
- Consumer confusion over rules and jargon is prohibiting take-up
- Entice people to invest by being interactive as well as informative
- Higher inflation encourages people to look for best possible returns
- Reward loyalty to retain customers
- Appeal to the mindset of younger adults
- Regular savings without withdrawal penalty
Market in Brief
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- Healthy sales growth, particularly in the maxi ISA market
- The future looks even brighter
- Demand drivers
- Recent developments
- Movement in the cash ISA rankings
- Competition is intensifying
- Fund platforms are now a major force in the distribution landscape
- Providers put greater investment into advertising and promotion
- Key consumer research findings – ISA penetration
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- Figure 1: Ownership of ISA products, 2006 and 2007
- Profile of the typical ISA subscriber
- Investment behaviour
- Cross-selling and targeting new prospects
Fast Forward Trends
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- Trend 1: The Over-Optioned
- Definition
- Context
- Market touch points/implications
- Trend 2: Trust in Me
- Definition
- Context
- Market touch points/implications
- Trend 3: Fashion is all
- Definition
- Context
- Market touch points/implications
Broader Market Environment
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- Key points
- Saving activity is set to pick up…
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- Figure 2: Total PDI, consumer expenditure and savings, 2003-12
- Implication
- ...as illustrated by the real growth in savings per capita
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- Figure 3: Average savings per UK adult aged 16+, at current and constant 2003 prices, 2003-12
- Implication
- A robust economy…
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- Figure 4: GDP annual growth and proportion of workforce unemployed – UK, 1997-2007
- Outlook
- …but inflation is up
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- Figure 5: Average annual changes in the bank base rate, CPI and RPI – UK, 1997-2007
- Implication and opportunity
- The ‘money illusion effect’
- The 2000-03 bear market benefited the sale of cash ISAs…
- …but had a detrimental effect on the sale of equity ISAs
- An improving picture for equity investment
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- Figure 6: FTSE 100 and FTSE All Share – daily index movements, April 1997-March 2007
- A cautiously optimistic outlook
- A growing pool of higher-rate taxpayers
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- Figure 7: Number of basic and higher-rate taxpayers, 1998/99-2007/08
- Implication and opportunity
- ABC1s account for a growing proportion of the adult population
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- Figure 8: Distribution of the UK adult population aged 15+, by socio-economic group, 1997-2012
- Implication and opportunity
- Another target group, the over-45s are also growing in number
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- Figure 9: Size of the UK population, by age group, 1997-2012
- Implication and opportunity
Internal Market Environment
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- Key points
- Tax appeal
- ISA regime extended indefinitely
- CTF to roll over into ISAs
- Current scheme structure is perceived as complex
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- Figure 10: Illustration of annual investment limits, from 6 April 2005 to 5 April 2008
- ISA limits to rise in 2008
- Key changes at a glance
- ISAs can hold a wide choice of investments…
- … and a broad spectrum of funds
- Corporate bonds are losing their appeal…
- …while property may also be losing its shine
- Self-select ISAs are a very niche area of the market
- Cash ISAs continue to be the most popular
- ISAs represent a falling proportion of net retail unit trust/OEIC ISA sales
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- Figure 11: Net retail unit trust/OEIC sales and proportion represented by ISAs, 2000-06
- Implication
- Tax relief on equity ISAs a red herring?
- PEPs and TOISAs
Competitive Context
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- Key points
- ISAs complement not compete
- Measuring their popularity against other product types
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- Figure 12: Penetration of ISAs and other savings and investment products, March 2007
- The ISA gap proves there is substantial scope to increase take-up
- Market inhibitors
- Limits are based on contributions not balances
- ISAs versus pensions
Strengths and Weaknesses in the Market
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- Figure 13: ISAs – SWOT analysis, 2007
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Who’s Innovating?
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- Government-led change
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- Figure 14: Recent and proposed changes to the ISA scheme, 2004-20
- The inclusion of new types of investment breathe life into the market
- Price is the main differentiator in the cash ISA market
- Abbey’s Super ISA
Trade Perspective
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- About the participating companies
- Providers welcome a more simplified structure…
- …but the increase in the equity ISA does not go far enough, say some
- Launch of new funds and investments has rejuvenated interest in equity ISAs
- The Internet is becoming more important in the distribution mix
- A promising outlook
Market Size and Forecast
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- Key points
- ISA sales continue to soar
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- Figure 15: New mini and maxi ISAs opened and amounts subscribed, 2000/01-2006/07
- Real growth in ISA subscriptions
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- Figure 16: Total amounts subscribed in mini and maxi ISAs, at current and constant prices, 2000/01-2006/07
- Investors show more interest in mini equity ISAs…
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- Figure 17: New mini ISAs opened and amounts subscribed, by type, 2000/01-2006/07
- Implication
- …but they pay less into them, on average
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- Figure 18: Average subcription per mini ISA, by type, 2000/01-2006/07
- Implication and opportunity
- Healthy rise in maxi ISA investment
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- Figure 19: Amounts invested in maxi ISAs, by component type, 2000/01-2006/07
- Implication and opportunity
- Average maxi ISA subscriptions in 2006/07 highest on record
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- Figure 20: Average subcription per maxi ISA, 2000/01-2006/07
- The size of the ISA market under the new simplified structure
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- Figure 21: Illustration of new ISA business under new structure, 2000/01-2006/07
- Implication
- Market forecast – strong sales growth predicted
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- Figure 22: Forecast of new ISA business, by component, 2006/07-2011/12
- Factors incorporated
Segment Performance
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- Key points
- More than £180 billion held in ISAs
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- Figure 23: Value of funds held in each of the three ISA components, 2000-06
- OEICs are the largest segment of the stocks and shares component
- Implication
Market Share
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- Key points
- Market leader Halifax has a 22% share of the cash ISA customer base
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- Figure 24: Provider share of mini cash ISA customer base, March 2007
- Halifax and HSBC are the main gainers in 2006/07…
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- Figure 25: Change in provider share of mini cash ISA customer base (top 11 only), 2006 and 2006
- …while Nationwide loses share
- A branch network is a major advantage
- Smaller players and new entrants
- Reasons for non-entry
- Building societies fare well in the cash ISA market
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- Figure 26: Share of ISA balances outstanding (cash component only), by main types of provider, February 2007
- Implication
- Leading ISA fund managers
- Halifax moves into pole position
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- Figure 27: Top 15 unit trust/OEIC ISA fund managers, by value of funds under management, 2005-07
- Top four account for two fifths of the market
Companies and Products
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- Key points
- Product differentiation
- Best cash ISA rates tend to be offered by smaller players
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- Figure 28: Highest-paying cash ISAs with a minimum balance of £10, mid-May 2007
- Additional restrictions
- Switchers targeted
- Price is less of a factor in the equity ISA market
- New partnerships
- Selected company profiles
- HBOS
- Nationwide Building Society
- Lloyds TSB Group
- Legal & General
Brand Elements
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- ISA brand map reveals low levels of trust and differentiation
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- Figure 29: ISA brand map, May 2007
- Halifax
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- Figure 30: Words associated with Halifax brand, May 2007
- Brand qualities
- Always giving you extra, but not excellence
- Nationwide Building Society
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- Figure 31: Words associated with Nationwide Building Society brand, May 2007
- Brand qualities
- Nationwide, the pride of ISAs
- HSBC
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- Figure 32: Words associated with HSBC brand, May 2007
- Brand qualities
- Seeking exclusivity or alienating customers?
- Abbey
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- Figure 33: Words associated with Abbey brand, May 2007
- Brand qualities
- Squirrelling away to win back customers
- National Savings & Investments
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- Figure 34: Words associated with NS&I brand, May 2007
- Brand qualities
- Scope to improve accessibility
- ING Direct
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- Figure 35: Words associated with the ING Direct brand, May 2007
- Brand qualities
- A breath of fresh air
- Usage of brands
- Halifax is storming ahead of the pack
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- Figure 36: Consumer usage of various ISA brands, May 2007
- Attitudes towards brands
- Halifax, Nationwide and NS&I are the most reputable…
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- Figure 37: Attitudes towards ISA brands, May 2007
- Brand satisfaction and performance
- ING Direct is delighting customers
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- Figure 38: Customer rating of ISA brands, May 2007
- Brand commitment
- NS&I and ING Direct are the most likely to be recommended
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- Figure 39: Degree of customer commitment to ISA brands, May 2007
- Round-up
Brand Communication and Promotion
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- Key points
- Big increase in cash ISA adspend
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- Figure 40: Total advertising expenditure on ISAs, by product category, 2002/03-2006/07
- Implication
- The press is the preferred media channel
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- Figure 41: Proportional distribution of adspend on ISAs, by main media, 2002/03-2006/07
- Legal & General maintains position as largest ISA advertiser
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- Figure 42: Top 15 ISA advertisers, 2005/06 and 2006/07
Channels to Market
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- Key points
- Most cash ISAs are sold direct
- People taking out equity ISAs often need advice
- Four fifths of equity ISA holders are Internet users
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- Figure 43: Internet penetration and online activity, by ISA holders, March 2007
- Implication and opportunity
- Equity ISAs and the main routes to market
- ISA sales via fund supermarkets are growing at the fastest rate
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- Figure 44: Gross retail sales of unit trust and OEIC ISAs, by distribution channel, 2000-06
- Fund supermarkets have become the dominant channel
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- Figure 45: Proportional representation of gross retail unit trust and OEIC ISA sales, by channel, 2000-06
- The growth of fund supermarkets
- Leading brands
- What they offer
Consumer Financial Activity
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- About the Financial Activity Bulletin
- Expected activity picks up
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- Figure 46: Expected financial activity – savings, investment, borrowing and debt repayment, December 2005-March 2007
- Much greater emphasis on saving than spending
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- Figure 47: UK savings and spending indices, January 2001-March 2007
- Activity remains subdued across most demographic segments
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- Figure 48: Expected financial activity over the next six months, by socio-demographic and income groups, March 2007
- Placing a cash deposit and saving in an ISA are the top activities
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- Figure 49: Top five financial activities planned in the next six months, March 2006-March 2007
- Identifying the main financial services providers
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- Figure 50: Saving, investment and lending: market sizes, by expected customer demand and brand leaders, March 2007
- Nationwide tops the activity chart
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- Figure 51: Activity levels of main financial services providers’ customer bases, March 2007
The Consumer – Product Penetration
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- Key points
- Survey background
- Take-up of ISAs has increased over the past year
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- Figure 52: Ownership of ISAs and other savings and investments, 2006 and 2007
- Implication
- One in four adults have a mini cash ISA
- Preference for cash over equities
- Scope for expanding the ISA market
- A note about life insurance ISAs
- The extent of the ISA gap
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- Figure 53: Cross-analysis of product ownership, March 2007
- Implication and opportunity
- Gender enigma
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- Figure 54: Ownership of ISAs and other savings/investments, by gender, age and socio-economic group, March 2007
- Implication and opportunity
- The over-45s are a key segment
- Implication and opportunity
- ABs find ISAs particularly appealing…
- Implication and opportunity
- …as do married couples
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- Figure 55: Ownership of ISAs and other savings/investments, by marital status, lifestage, Mintel’s Special Groups and tenure, March 2007
- Implication and opportunity
- Wealth is a major determiner
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- Figure 56: Ownership of ISAs and other savings/investments, by working status, gross annual household income, region and ACORN category, March 2007
- Implication and opportunity
- Waitrose and M&S shoppers record high penetration of ISAs
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- Figure 57: Ownership of ISAs and other savings/investment types, by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, March 2007
- Implication and opportunity
- Over two thirds of ISA holders are aged 45+
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- Figure 58: Profile of ISA holders, by gender, age, socio-economic group and region, March 2007
- Implication and opportunity
The Consumer – Sourcing Cash ISAs
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- Key points
- More than two thirds of savers obtained their cash ISA from a bank
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- Figure 59: Type of provider obtained cash ISA from, March 2007
- Different types of ISA provider attract different types of customer
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- Figure 60: Customer profile of the main types of cash ISA provider, by gender, age, socio-economic group and region, March 2007
- Implication and opportunity
The Consumer – Attitudes and Behaviours
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- Key points
- Mini stocks and shares ISA holders are more likely to take advice…
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- Figure 61: Agreement with statements about ISA usage, by type of ISA held, March 2007
- Implication
- These proportions are likely to be understating the actual amount of both maxi and mini equity ISA sales arranged with advice (including advice delivered by sales agents in-branch or over the telephone). Some of the largest ISA providers have reported to Mintel that the vast majority of sales are generated face to face via a branch-based adviser.
- …while maxi ISA subscribers are most likely to shop around
- Implication
- Mini equity ISA investors prefer making regular payments
- Implication
- Single-premium ISAs ideal for lump-sum investment
- Implication
- Proportion intending to invest the full cash ISA allowance falls
- Implication
- Many cash ISA savers are reluctant to make withdrawals
- Customer churn
- Implication
- A quarter of ISA holders are saving for their future
- Implication
- Customers of ‘other’ providers are more likely to shop around
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- Figure 62: Agreement with statements about ISA usage, by type of provider (cash ISA holders only), March 2007
- Implication and opportunity
- Men are more likely to use the Internet to find the best ISA deals
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- Figure 63: Agreement with statements about ISA usage, by gender and socio-economic group, March 2007
- Implication
- Three in ten 16-34-year-olds are saving for their future
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- Figure 64: Agreement with statements about ISA usage, by age, March 2007
- Implication
The Consumer – Targeting Opportunities
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- Key points
- Coming up
- CHAID analysis identifies older ABs as the main target group for ISAs
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- Figure 65: Target groups identified for the ISA market, March 2007
- The current account connection
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- Figure 66: Main current account provider, by total sample, ISA subscribers and non-ISA subsribers, March 2007
- Halifax is best at cross-selling cash ISAs to its current account customers
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- Figure 67: Cash ISA provider, by current account provider, March 2007
- Implication
- Instant access is a popular feature of savings accounts and cash ISAs
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- Figure 68: Agreement with statements about ISAs and saving in general, by ownership of savings and investments, March 2007
- Implication
- Just three in five ISA subscribers think that ISAs are a great way to save
- Implication
- A significant minority are for the cash ISA limit to be raised
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- Figure 69: Agreement with statements about ISAs and saving in general, by type of ISA held, March 2007
- Implication
- Consumer confusion over rules and jargon is prohibiting take-up
- Implication
- HSBC customers are most pro-ISAs…
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- Figure 70: Agreement with statements about ISAs and saving in general, by current account provider, March 2007
- Implication and opportunity
- …while Abbey customers are the most resistant
- Implication and opportunity
- Cluster analysis
- What is cluster analysis?
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- Figure 71: ISA clusters, March 2007
- Core ISA Targets (6% of adults)
- Instant-access Targets (8% of adults)
- Mixed Potential (24% of adults)
- Confused Potential (8% of adults)
- ISA Cool (13% of adults)
- Disengaged (41% of adults)
- Cluster composition
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- Figure 72: Agreement with statements about ISAs and saving in general, by ISA clusters, March 2007
- Around four in five Core ISA and Instant-access Targets have an ISA
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- Figure 73: Ownership of ISAs and other savings/investments, by ISA clusters, March 2007
- Core ISA Targets invest in their future…
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- Figure 74: Agreement with statements about ISA usage, by ISA clusters, March 2007
- …and are most likely to be ABC1s aged 45-64
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- Figure 75: Profile of ISA clusters, by gender, age, socio-economic group, lifestage and marital status, March 2007
- Implication and opportunity
- The income profiles of the top two target groups show a higher-end bias
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- Figure 76: Profile of ISA clusters, by tenure, working status, gross annual household income, region and ACORN category, March 2007
- Tesco and Sainsbury’s have an above-average share of ISA targets visiting their stores
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- Figure 77: Profile of ISA clusters, by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, March 2007
- Implication and opportunity
- Nationwide has double the proportion of Core ISA Targets
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- Figure 78: ISA clusters, by main current account provider, March 2007
- Implication
- Further analysis
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