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ISAs - UK - November 2017

OVERVIEW
What you need to know
Products covered in this Report
EXECUTIVE SUMMARY
The market
Value of account subscriptions fell by 23%
Figure 1: Number of ISAs and amounts subscribed, 2010/11-2016/17
Lifetime ISA has the potential to revive the cash ISA market
Figure 2: Forecast of total adult cash ISA subscriptions, 2011/12-2021/22
Stocks and shares ISA market forecast to grow by 27% by 2021/22
Figure 3: Forecast of total adult stocks and shares ISA subscriptions, 2011/12-2021/22
Personal Savings Allowance undermines ISA benefits
Savings ratio falls to low of 1.7% in Q1 2017
Figure 4: Quarterly gross household savings and savings ratio, seasonally adjusted and at current prices, Q1 2013-Q1 2017
Companies and brands
Nationwide is the biggest provider of cash ISAs
Figure 5: Ranking of cash ISA providers, by proportion of ISA holders, April 2017
Fidelity is the largest provider of stocks and shares ISAs
Figure 6: Top 10 investment ISA providers, by ISA funds under management, May 2016 and May 2017
Lifetime ISA market dominated by stocks and shares
New FinTech investment services bring investing to the masses
Adspend falls by 38%
Figure 7: Total above-the-line, online display and direct mail advertising expenditure on ISAs, 2012/13-2016/17
The consumer
Cash ISAs are second after savings accounts for popularity
Figure 8: Savings product ownership, August 2017
Only half of ISA holders aware of new Flexible ISA rule change
Figure 9: Awareness of the Flexible ISA rule change, August 2017
Withdrawal restrictions are an important disciplinary feature for younger savers
Figure 10: Behaviours and attitudes towards the introduction of the new flexible rule changes, August 2017
Alternative ISAs more likely to attract savings
Figure 11: Attitudes towards saving in an ISA, August 2017
Online services must cater to different levels of investor
Figure 12: Important factors when choosing a stocks and shares ISA provider, August 2017
A third are considering opening a Lifetime ISA
Figure 13: Agreement with the statement ‘I am considering opening a Lifetime ISA’, August 2017
Consumers split over cash vs stocks and shares Lifetime ISA
Figure 14: Considerations and attitudes towards the Lifetime ISA, August 2017
What we think
ISSUES AND INSIGHTS
Flexible rules add another unneeded layer of complication
The facts
The implications
Delayed uptake of Lifetime ISA due to desire to stay with main bank
The facts
The implications
Stocks and shares providers need to take charge on transparency
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Cash subscriptions fall whilst stocks and shares rise slightly
Personal Savings Allowance undermines ISA benefits
Growth in contributions will be driven by stocks and shares ISAs
Savings ratio falls to low of 1.7% in Q1 2017
People more likely to look beyond their main bank for stocks and shares
MARKET SIZE
Value of account subscriptions fell by 23%
Figure 15: Number of ISAs and amounts subscribed, 2010/11-2016/17
Cash subscriptions fall whilst stocks and shares rise slightly
Figure 16: Number of ISAs and amounts subscribed, segmented by component type, 2010/11-2016/17
Average subscription values for stocks and shares continue to rise
Figure 17: Average subscription per account, 2010/11-2016/17
OEICs take greatest share of stocks and shares investments
Figure 18: Value of funds held in adult ISAs, by type of investment, 2013/14-2016/17
MARKET FORECAST
Lifetime ISA has the potential to revive the cash ISA market
Figure 19: Forecast of total adult cash ISA subscriptions, 2011/12-2021/22
Figure 20: Forecast of total adult cash ISA subscriptions, at current prices, 2011/12-2021/22
Stocks and shares ISA market forecast to grow by 27% by 2021/22
Figure 21: Forecast of total adult stocks and shares ISA subscriptions, 2011/12-2021/22
Figure 22: Forecast of total adult stocks and shares ISA subscriptions, at current prices, 2011/12-2021/22
Forecast methodology
MARKET DRIVERS
Savings ratio falls to low of 1.7% in Q1 2017
Figure 23: Quarterly gross household savings and savings ratio, seasonally adjusted and at current prices, Q1 2013-Q1 2017
ISA rates remain at historic lows
Figure 24: Average monthly quoted cash ISA variable rate and fixed rate, September 2011-August 2017
Government introduces new ISA savings products
Help to Buy ISA
Lifetime ISA
Innovative Finance ISA
REGULATORY AND LEGISLATIVE CHANGES
Personal Savings Allowance undermines ISA benefits
Regulatory focus on clarity and transparency
FCA focuses on competition in the investment management market
Improving the treatment of cash savings customers
MiFID II aims to increase investor protection
Government introduces new flexible feature
Rising ISA limits unlikely to matter to the everyday saver
Figure 25: Annual ISA subscription limits, 2008/09-2017/18
CHANNELS TO MARKET
More people take out a cash ISA with their main bank…
…but people look elsewhere for stocks and shares
Figure 26: Financial product ownership and cross-sales, June 2017
COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
Nationwide is the biggest provider of cash ISAs
Lifetime ISA market dominated by stocks and shares
New FinTech investment services bring investing to the masses
Adspend falls by 38%
MARKET SHARE
Nationwide is the largest provider of cash ISAs
High street banks dominate the market
Figure 27: Ranking of cash ISA providers, by proportion of ISA holders, April 2017
Fidelity is the largest provider of stocks and shares ISAs
Figure 28: Top 10 investment ISA providers, by ISA funds under management, May 2016 and May 2017
COMPETITIVE STRATEGIES
Lifetime ISA market dominated by stocks and shares
Uptake of the Innovative Finance ISA has been muted
Not all providers have adapted to the new flexible rules
Figure 29: Selected cash ISA providers, October 2017
Breadth of products varies by type of provider
FinTech challengers avoid cash ISAs
Savings providers act ahead of any future interest rate rises
LAUNCH ACTIVITY AND INNOVATION
Providers look for ways to help people maximise their allowance
Charter Savings launches Mix and Match ISA
CustomISA from Newcastle Building Society
Virgin Money champions interest alternatives
Double Champions Cash ISA
Increased points incentive for new stocks and shares ISA holders
Vanguard launches in the UK with half-price fees
New FinTech investment services bring investing to the masses
Nutmeg
Munnypot
Wealthify
Moneybox
ADVERTISING AND MARKETING ACTIVITY
Adspend falls by 38%
Figure 30: Total above-the-line, online display and direct mail advertising expenditure on ISAs, 2012/13-2016/17
Cash ISA providers’ adspend remains low
Figure 31: Top 10 recorded above-the-line, online display and direct mail advertisers of cash ISAs, 2012/13-2016/17
Fidelity is the largest advertiser of stocks and shares ISAs
Figure 32: Top 10 recorded above-the-line, online display and direct mail advertisers of stocks and shares ISAs, 2012/13-2016/17
Press takes largest proportion of advertising spend
Figure 33: Total above-the-line, online display and direct mail advertising expenditure on ISAs, by media type, 2016/17
Nielsen Ad Intel coverage
THE CONSUMER – WHAT YOU NEED TO KNOW
Cash ISAs are second after savings accounts for popularity
Only half of ISA holders are aware of new Flexible ISA rule change
Alternative ISAs are more likely to attract savings
Online services must cater to different levels of investor
A third are considering opening a Lifetime ISA
SAVINGS PRODUCT OWNERSHIP
Savings accounts are the most commonly held saving/investment product
One in five own a stocks and shares ISA
Figure 34: Savings product ownership, August 2017
Help to Buy/Lifetime ISA uptake strongest among 18-34-year-olds
Figure 35: Savings product ownership, by age, August 2017
VALUE OF ISA SAVINGS
A fifth have less than £1,000 in ISA savings…
…whilst only a third have over £10,000
Figure 36: Value of ISA savings, August 2017
Stocks and shares ISA holders more likely to have over £10,000 in ISA savings
Figure 37: Value of ISA savings, by ISA ownership, August 2017
AWARENESS OF THE FLEXIBLE RULE CHANGE
Only half of ISA holders are aware of the changes
Figure 38: Awareness of Flexible ISA rule change, August 2017
Higher-value savers more aware
Figure 39: Awareness of Flexible ISA rule change, by value of ISA savings, August 2017
ATTITUDES TOWARDS THE FLEXIBLE RULE CHANGE
Three quarters say they like the flexibility...
…but the restrictions are an important disciplinary feature for younger savers
Figure 40: Behaviours and attitudes towards the introduction of the new flexible rule changes, August 2017
Providers need to do more to increase clarity around the new feature
Flexible feature has led to a change in behaviour
Figure 41: Behaviours and attitudes towards the introduction of the new flexible rule changes, by age, August 2017
ATTITUDES TOWARDS SAVING IN AN ISA
Low rates are affecting people’s incentive to save
Figure 42: Attitudes towards saving in an ISA, August 2017
Half save in their ISA first…
…rising among those with newer forms of ISAs
Figure 43: Agreement with the statement ‘I save in my ISA before saving anywhere else’, by type of ISA held, August 2017
Only one in five will consider opening a stocks and shares ISA
MOVING MONEY
A third have moved money out of an ISA
Figure 44: Money movements over the last 12 months, August 2017
Savers with lower ISA balances more likely to have moved money
Figure 45: Agreement with the statement ‘I've moved money from an ISA to my current account/other cash-based savings account in the last 12 months’, by value of ISA savings, August 2017
One in five have moved money to an investment product…
…but ultimately cash alternatives are preferred over stocks and shares
CHOOSING A STOCKS AND SHARES ISA
Lack of understanding means clarity is key
Figure 46: Important factors when choosing a stocks and shares ISA provider, August 2017
Simplicity is more important than having a range of investment options
Online services must cater to different levels of investor
ATTITUDES TOWARDS THE LIFETIME ISA
A third are considering opening a Lifetime ISA
Figure 47: Agreement with the statement ‘I am considering opening a Lifetime ISA’, August 2017
25-29-year-olds most likely to be considering opening one
Figure 48: Considerations and attitudes towards the Lifetime ISA, by age, August 2017
The need for access puts people off
Figure 49: Considerations and attitudes towards the Lifetime ISA, August 2017
Split over cash vs investment preference
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology
APPENDIX – MARKET SIZE AND FORECAST
Best- and worst-case forecasts for cash ISA subscription value
Figure 50: Best- and worst-case forecasts for total adult cash ISA subscriptions, at current prices, 2016/17-2021/22
Best- and worst-case forecasts for stocks and shares ISA subscription value
Figure 51: Best- and worst-case forecasts for total adult stocks and shares ISA subscriptions, at current prices, 2016/17-2021/22
Cash ISA volume forecast
Figure 52: Market forecast for number of adult cash ISA subscriptions, 2011/12-2021/22
Figure 53: Best- and worst-case forecasts for total number of adult cash ISA subscriptions, 2016/17-2021/22
Stocks and shares ISA volume forecast
Figure 54: Market forecast for number of adult stocks and shares ISA subscriptions, 2011/12-2021/22
Figure 55: Best- and worst-case forecasts for number of adult stocks and shares ISA subscriptions, 2016/17-2021/22
Forecast methodology

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