Savers stash more cash in ISAs; 166,000 use new Lifetime ISA

Laura Suter
31 August 2018

•       Number of people using ISAs fell to lowest level since 2000 – but amount saved increased year-on-year to almost £70bn (
•       A total of 166,000 people used the Lifetime ISA in the first year
•       Junior ISAs remain stubbornly in cash – albeit with a small drop 

Laura Suter, personal finance analyst at investment platform AJ Bell, comments:

“The number of people saving into an ISA has fallen for another year, taking the total number of ISA accounts to its lowest level since the 1999-00 tax year. This comes after a similar drop the previous year, with an almost 13% fall in the number of ISAs opened.

“However, the amount of money saved into ISA accounts in 2017-18 has actually increased in the past year, to £69.3bn – so fewer people are using the accounts but those that do are saving more. This is a surprise turnaround following a 23% fall in the amount of money saved within an ISA between 2016-16 and 2016-17 – although remains below 2015-16’s figures.

“The majority (72%) remains in cash ISAs. At the paltry interest rates being offered by many banks and building societies, coupled with currently high inflation, the bulk of this money is likely losing spending power in real terms. 

“The effect of the personal savings allowance, which launched in 2016 and gives £1,000 of interest tax-free for basic-rate taxpayers or £500 for higher-rate taxpayers, is continuing to diminish the appeal of ISAs for savers. However, for those individuals who are likely to move into the next income tax bracket soon, or those fearful of Government change to the personal savings allowance, it could be prudent to start stashing cash away within the ISA wrapper. 

“Junior ISAs continue to be largely invested in cash, which makes little sense for many savers as the money is locked up until the child reaches the age of 18 – making it the ideal long-term investment in many cases. 

“A total of 57% of Junior ISA money is in cash, a slight improvement on last year, when more than 60% of money was in cash. There has actually been a decrease in the amount held in cash Junior ISA accounts, of £8m, while more than £50m was invested through Junior ISAs.

“The first figures have been released for the Lifetime ISA, giving the first look at how popular the market has been since the newest ISA was launched in April 2017. A total of 166,000 accounts have been opened and £517m saved – averaging £3,114 per account.

“The figures show that first-time buyers and those saving for retirement are maximising their chances of affording a property or pension by making use of the 25% Government bonus on up to £4,000 saved each year. 

“This is the second year of figures for the Innovative ISA, which allows savers to invest in peer-to-peer lending through the tax wrapper. There has been a significant increase on the 5,000 accounts opened in 2016-17, with £36m of money saved. Now 31,000 accounts have been opened and £290m saved.” 

Laura Suter
Personal Finance Analyst
Laura Suter is personal finance analyst at AJ Bell. She is a multi-award winning former financial journalist, having specialised in investments. Laura joined AJ Bell from the Daily Telegraph, where she was investment editor. She has previously worked for adviser publications Money Marketing and Money Management, and has worked for an investment publication in New York. She has a degree in Journalism Studies from University of Sheffield.
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