Table of Contents
Issues in the Market
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- Key issues
- Market definitions
- Abbreviations
Future Opportunities
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- Scope to expand the market further…
- … but these are uncertain times
- Pricing is key
- Convenience and accessibility are vital too
- Appeal to the mindset of younger adults
- Consumer-friendly equity ISAs
Market in Brief
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- ISA penetration increases
- Subscriptions are also up
- Wider savings environment
- New industry developments
- Provider rankings
- ISA distribution mix
- Advertising activity
- The typical ISA subscriber is an AB aged 45+
- Saver behaviour
- Saver attitudes
Internal Market Environment
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- Key points
- Recent changes to simplify the scheme…
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- Figure 1: Recent and proposed changes to the ISA scheme, 2004-20
- … have been welcomed by the investment industry…
- … but there’s still scope for improvement say some
- Allowance upped
- New scheme structure
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- Figure 2: Illustration of annual investment limits, 2009/10 versus 2010/11
- ISA transfers to be speeded up
- Tax relief on equity ISAs a red herring?
- Calls to reinstate 10% tax credit
Broader Market Environment
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- Key points
- Summary of the main market and macroeconomic developments
- Less appetite for spending
- Implication
- With interest rates slashed, savers suffer reduced returns
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- Figure 3: Average annual changes in the bank base rate, CPI and RPI - UK, 2000-09
- Implications for savers
- Stockmarket turmoil – have we passed the bottom?
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- Figure 4: FTSE 100 and FTSE All Share – daily index movements, May 2000-May 2009
- Implication for investors
- The crunch effect
- Number of higher-rate taxpayers declined in 2008/09
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- Figure 5: Number of basic and higher-rate taxpayers, 1998/99-2008/09
- Insight and implication
- Another target group, the over-50s, are growing in number
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- Figure 6: Size of the UK population, by age group, 1999-2013
- Insight and implication
Competitive Context
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- Key points
- ISAs complement other savings and investment products
- Cash ISAs are the second-most popular savings and investment product
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- Figure 7: Penetration of ISAs and other savings and investment products, April 2009
- Measuring the cash ISA gap
- Market inhibitors
- Cash ISA rates fare poorly against taxable accounts
- Investors shift in favour of bonds
Strengths and Weaknesses in the Market
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- Figure 8: ISAs – strengths, weaknesses, opportunities and threats, 2009
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Who’s Innovating?
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- Key points
- Price is the main differentiator
- Rate-led business
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- Figure 9: Average month end cash ISA interest rates, May 03-May 09
- Recent new cash ISA launches
- Broad array of investment funds available to retail investors
- Recent investment fund activity
- LV= launches three funds targeted at different risk profiles
- New Investec fund seeks to appeal to those who want capital protection
- Low-charging Vanguard enters the UK investment market
Trade Perspective
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- About the participants
- 2009 ISA season
- Crisis impact
- Increase in annual limits welcomed
- Mid-year chaos?
- Promising outlook
Market Size and Forecast
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- Key points
- £220 billion held in ISAs
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- Figure 10: Value of funds held in ISAs, 2004-08
- New ISA subscriptions rose 5% in 2008/09
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- Figure 11: Number of ISA accounts and amounts subscribed, 1999-2000-2008/09
- Insight and implication
- Cash ISA subscriptions increased in 2009/10, while equity ISA subscriptions fell
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- Figure 12: Number of ISA accounts and amounts subscribed, segmented by type, 1999-2000-2008/09
- Implication
- Average subscription to equity ISA remained at previous year’s level
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- Figure 13: Average subscription per account, 1999-2000-2008/09
- 2008 saw ISA investors become more cautious
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- Figure 14: Total net retail unit trust/OEIC sales and net retail ISA sales, 2004-08
- Confidence returning?
- Winners and losers
- ISA market forecast: A mixed bag
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- Figure 15: Forecast of new ISA business, by component, 2008/09-2013/14
- Factors incorporated
Market Share
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- Key points
- Cash ISA market has seen some new entrants over the past couple of years
- M&A activity shakes up the cash ISA rankings
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- Figure 16: Provider share of cash ISA customer base, April 2009
- Government-backed providers have grown share
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- Figure 17: Top 11 cash ISA providers, by customer share (rebased), 2009
- Insight and implication
- Building societies fare well in the cash ISA market
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- Figure 18: Share of cash ISA balances outstanding, by main types of provider, March 2009
- Leading ISA fund managers
- Fidelity tops ISA fund rankings
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- Figure 19: Top 15 unit trust/OEIC ISA fund managers, by value of funds under management, 2007-09
- Steady consolidation
Companies and Products
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- Selected company profiles
- Fidelity
- Legal & General
- Lloyds Banking Group
- Nationwide Building Society
- RBS Group
- Grupo Santander
Brand Communication and Promotion
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- Key points
- Many ISA providers cut back their ISA advertising in 2008/09
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- Figure 20: Total advertising expenditure on ISAs, by product category, 2004/05-2008/09
- Insight and implication
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- Figure 21: Average monthly adspend on ISAs as a percentage of annual adspend, 2008
- The press is the preferred media channel
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- Figure 22: Proportional distribution of adspend on ISAs, by main media, 2004/05-2008/09
- Halifax maintains position as largest ISA advertiser
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- Figure 23: Top 15 ISA advertisers, 2007/08 and 2008/09
Channels to Market
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- Key points
- Cash ISAs are predominately sold direct to consumers
- IFAs are the top advice source for equity ISA investors
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- Figure 24: Preferred sources of investment advice, by cash and equity ISA holders, April 2009
- Equity ISAs: the main routes to market
- All channels experienced a decline in gross ISA fund sales in 2008
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- Figure 25: Gross retail sales of unit trust and OEIC ISAs, by distribution channel, 2004-08
- Insight and implication
- Fund supermarkets continue to be the dominant sales channel
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- Figure 26: Proportional representation of gross retail unit trust and OEIC ISA sales, by channel, 2004-08
- The rise of the fund supermarkets
- What they offer
- The leading fund platforms
The Consumer – Value of Investible Assets
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- Key points
- Survey background
- Half of UK adults have some level of savings
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- Figure 27: Value of savings and other investible assets, April 2009
- Wealth increases with age
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- Figure 28: Value of savings and other investible assets, by age, April 2009
- Insight and implication
- One in four ABs are in the affluent to HNW category
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- Figure 29: Value of savings and other investible assets, by gender and socio-economic group, April 2009
The Consumer – ISA Ownership
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- Key points
- Cash ISA is the second most popular savings product
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- Figure 30: Savings and investment products owned, by age, April 2009
- Consumers favour fixed-rate products
- Take-up of ISAs has increased over the past year…
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- Figure 31: Change in ISA penetration between 2008 and 2009
- Insight and implication
- …but there’s scope to expand the market further
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- Figure 32: ISA gap assessment, April 2009
- Insight and implication
- 55-64-year-olds use ISAs the most
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- Figure 33: Savings and investment products owned, by age, April 2009
- Insight and implication
- Gender variation
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- Figure 34: Savings and investment products owned, by gender and socio-economic group, April 2009
- Insight and implication
- ABs really like ISAs
- Insight and implication
- Personal wealth is a key determiner of ISA ownership
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- Figure 35: Savings and investment products owned, by level of investible assets, April 2009
- Insight and implication
- CHAID analysis identifies older ABs as the main target group for ISAs
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- Figure 36: Target groups identified for the ISA market, April 2009
The Consumer – Investor Behaviour
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- Key points
- Around one in four contributed the maximum to their cash ISA
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- Figure 37: Agreement with statements about ISA usage, April 2009
- Insight and implication
- Some customer churn
- Insight and implication
- More make regular payments than deposit lump sums
- Insight and implication
- Over a fifth of savers withdrew money from their cash ISA in 2008/09
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- Figure 38: Agreement with awareness statement, April 2008
- Regular saver products will appeal most to the under-35s
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- Figure 39: Agreement with statements about ISA usage, by age, April 2009
- Insight and implication
- Men are much more inclined to deposit lump sums into their cash ISA
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- Figure 40: Agreement with statements about ISA usage, by gender and socio-economic group, April 2009
The Consumer – Targeting Opportunities
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- Key points
- Instant access is a popular feature
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- Figure 41: Agreement with statements about ISAs and saving in general, April 2009
- Insight and implication
- Merely half of all equity ISA investors think ISAs are a great way to save
- Insight and implication
- A quarter of 55-64-year-olds say low returns makes saving pointless
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- Figure 42: Agreement with statements about ISAs and saving in general, by age, April 2009
- Insight and implication
- One in five ABs think now is a good time to invest in equities
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- Figure 43: Agreement with statements about ISAs and saving in general, by gender and socio-economic group, April 2009
- Insight and implication
- Further analysis
Appendix – Ownership of ISAs
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- Figure 44: Ownership of cash and equity ISAs, by demographic, April 2009
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Appendix – Demographic Profile of ISA Subscribers
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- Figure 45: Demographic profile of cash and equity ISA subscribers, April 2009
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