Following the increase in the NISA annual allowance to £15,000 in 2014, the value of ISA subscriptions increased by 38% to reach £78.8 billion by the end of the 2014/15 tax year. Most of this increase came from cash deposits, which increased in value by 60% year-on-year, despite an overall decrease in the number of subscribed accounts for both cash, and stocks and shares deposits. As a result, average subscription value increased by 40% to £6,064 in 2014/15. This reveals that value growth has mainly been driven by a few affluent savers, with limited engagement in the ISA market from savers that do not fall within this bracket. Providers will need to tackle this disparity if they are to capitalise on the opportunities presented by an increasingly competitive personal savings market.

This report examines the ISA market, investigating competing products and factors influencing the market, including wider economic trends and regulatory challenges. It provides an overview of value and volume sales for cash and stocks and shares ISAs, including a market forecast showing expected growth in the value of the ISA market over the next five years. Mintel’s consumer research concludes the report, looking at product ownership, the value of ISA savings, motivations for saving, planned uses for ISA savings, ISA savings habits, and general attitudes towards ISA savings products and providers.

New individual savings accounts (NISAs) were introduced on 1 July 2014. NISAs are a tax-free ‘wrapper’ that can hold a range of investments and cash, and are exempt from income and capital gains tax. Up to £15,240 can be invested into an ISA in any one tax year and money can be moved from stocks and shares to a cash ISA, and vice versa. From autumn 2015, it will be possible for NISA owners to remove cash and replace it within the year without this affecting the annual allowance or the tax-free status of savings.

NISAs replace cash ISAs and stocks and shares ISAs.

Cash ISAs are low-risk investments for cash savings. There are many varieties of cash ISA. Some will offer instant access to money with no penalty, while others will have restrictions, such as a fixed term, or require notice to be given before money can be withdrawn. If a withdrawal is made within a fixed period this may result in a penalty or loss of interest.

Stocks and shares ISAs allow individuals to invest in a wide range of investments, including unit trusts, open-ended investment companies (OEICs), exchange-traded funds (ETFs), investment trusts, and corporate and government bonds. They can also wrap individual stocks and shares listed on a recognised stock exchange in a self-select ISA. A government consultation is currently being carried out to investigate the possibilities of increasing the range of ISA-eligible investments. Investments held in an ISA are exempt from capital gains tax, while dividends attract lower tax than on shares held outside an ISA.

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