• 450,000 fewer people use investment ISAs as market volatility spooks savers
• Cash ISA use rebounds, jumping by 21%
• The investment gender gap has narrowed, with more women using stocks and shares ISAs…
• …but women still prefer to keep it in cash
• Parents put £1,020 into Junior ISAs – a far cry from the new annual limit of £9,000
• Innovative Finance ISA average subscriptions leap by 50%, but with fewer people using them
Laura Suter, personal finance analyst at investment platform AJ Bell, comments on the latest HMRC ISA figures:
“The market uncertainty that we’ve seen in recent years appears to have put people off investing their ISA money, with 450,000 fewer people subscribing to stocks and shares ISAs compared to 2017/18. At the same time cash ISA use has leapt by a fifth, after years of falling figures. The introduction of the Personal Savings Allowance, which gave most people a tax-free allowance, seriously dented the popularity of the cash ISA but the tide could be about to turn. The average amount we’re all putting into our ISAs stayed about flat, with £5,187 put into cash ISAs and £9,331 into stocks and shares ISAs.
Gender split
“At every age range more women are putting their money into ISAs than men, but they are still mainly sticking to cash accounts rather than dipping their toes into investing. However, the gender gap is closing. In 2017/18, the latest year that data is available, 74% of women putting their money into an ISA kept it in cash, down from 80% the previous year. The number using an investment ISA rose from 17% to 21% in that period too. In contrast just 64% of male ISA users are putting their money in cash, compared to 29% who use a stocks and shares ISA. The remainder did a combination of the two.
“The top cash ISA rate at the moment is just over 1%, showing the minimal return that cash ISA savers are getting on their money. By saving more in low-paying cash accounts this inevitably means that women end up with less in their ISAs than men over the long term and extends the savings gap between the two genders.
Junior ISAs
“More people are squirreling money away for their little ones, with Junior ISA usage up 5% year-on-year.The average amount people are putting into Junior ISAs has also risen but only slightly, to £1,020. This low average amount does make you wonder why the Government decided to increase the Junior ISA allowance to £9,000 in the current year and highlights that this additional tax break will only be used by a small minority of very wealthy people.
“Frustratingly parents are still relying on cash ISAs for their children’s savings, with cash accounts making up 70% of total Junior ISA usage – a figure that has stubbornly not budged since the previous year. If you’re locking money up for up to 18 years you’re in the ideal place to be able to ride out the rises and falls in the stock market and have the potential to supercharge your child’s savings by getting higher returns.”
Lifetime ISA figures
“The number of people opening a Lifetime ISA jumped by 45%, with 223,000 accounts opened. However, people were putting less money in the accounts, with the average subscription dropping by 16% to £2,709. This likely reflects the fact that in the first year of the Lifetime ISA you could transfer your entire Help to Buy ISA balance without it counting towards your annual £4,000 LISA subscription, while in 2018/19 this was not possible.
“The average subscription figure doesn’t include the Government bonus, so means the average Lifetime ISA saver is getting £677 of free money from the Government each year, topping the average annual savings up to £3,386. In total people have put £1,090,000 into their Lifetime ISAs since launch, which means the Government has handed out a total of £272,500 in bonuses.
Innovative Finance ISAs
“After a massive spike in usage in its second year, fewer people are using Innovative Finance ISAs, with the number of people putting money into them dropping by almost a quarter between 2017/18 and 2018/19. However, this smaller pool of people that did use them put more money in, with the average subscription jumping by more than 50% to £8,632.
“These figures hint that the Innovative Finance ISA may be being used more by sophisticated investors, who hopefully understand the risks involved in these riskier investments. We’d expect to see a larger drop-off in the numbers in the most recent tax year, following the FCA’s ban on mass marketing for most of the products that fall into this bracket.”
