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Individual Savings Accounts in the UK - Key Trends and Opportunities to 2018

Individual Savings Accounts in the UK - Key Trends and Opportunities to 2018


Interest rates are at their lowest levels since individual savings accounts (ISAs) began, which significantly reduces consumers’ commitment to saving. As a result, consumers – those who can afford to save – are starting to opt either for stocks and shares accounts or deciding to pay off long-standing debts with higher interest rates.

The average rate offered on cash ISAs fell from 2.55% at the start of 2012 to 1.74% in February 2013, and to just 1.64% at the start of 2014. The average rates for savings accounts fell from 5.09% in 2008 and 1.48% in 2014, which highlights the impact of the recession and the availability of cheap funds for the banks.

Eight out of every 10 ISAs opened in FY2013–2014 were still cash ISAs however, as savers remained risk-averse, despite banks offering the worst interest rates on record. Stocks and shares ISAs are starting to recover however, following a substantial decline in the number for accounts from FY2010–2011 to FY2011–2012. The amount subscribed to stocks and shares ISAs has increased considerably since FY2009 – from GBP12.5 million to GBP18.4 million - which suggests that a smaller percentage of wealthier people, who can afford the increased risk, are filling these ISAs to the limit.

The BoE’s central bank rate has remained at 0.5% since 2009, providing banks with an unparalleled level of cheap funds, meaning that the banks have significantly less need to compete for funds from consumers. The introduction of the government’s Funding for Lending scheme – providing up to GBP80.0 billion to major banks to subsidize mortgage lending – has further reduced the banks’ need for funds, which has had a considerable impact on the savings market. There have been an estimated 2,560 savings products cut since the introduction of the Funding for Lending scheme in August 2012, as of November 2014.

Real wages endured negative growth for most of the 2008–2014 period, despite positive growth for the last three months of 2014. This, combined with soaring house prices and energy bills, means that consumers were squeezed during the recession, and are subsequently less able to set aside amounts every month for savings accounts. House prices in the UK increased by 18.6% between 2009 and 2014 – rising by 9.9% in 2014 alone, according to Nationwide’s house price index. Research by consumer body Which? found that the price of gas and electricity grew by 127% from 2003–2004 to 2013–2014, and that the average household is paying GBP410.0 more per year for energy, despite using less.

Several changes have been made to ISA regulation to try to stimulate the industry in the face of low interest rates, since the Funding for Lending scheme. New ISAs (NISAs) were introduced in the April 2014 budget, which increased the upper annual limit for an individual to GBP15,000.0. Tax advantages were also introduced in Chancellor George Osborne’s 2014 Autumn Statement, allowing ISAs to pass tax-free to a spouse after death. Osborne also announced that there will no longer be capital gains tax for profits of under GBP11,000.0 on stocks and shares ISAs.Summary

  • This report provides market analysis, information and insights into the UK ISA industry
  • It provides a breakdown of the different forms of ISAs in the UK
  • It analyses drivers and the outlook for the market
  • It provides information on the main banks in the UK market
  • It covers news and regulatory developments
Reasons To Buy

Gain an understanding of the UK ISA industr.

Key Highlights

Consumer credit growth has shown consistent signs of growth in 2014, for the first time since before the financial crisis. This is in a large part due to consumer confidence also recording a positive number for the first time since the credit crunch, low interest rates and a steadily growing GDP, as nearly every category of lending has grown up to July 2014.Demand for and availability of credit also grew in both the second and third quarters of 2014, which has been a key factor.

  • Executive Summary
  • Introduction
    • What is this Report About?
    • Definitions
      • Table Banking Industry Definitions
    • Methodology
  • Market Analysis
    • Market Size
      • Cash ISAs
        • Table The UK - ISA Subscription Limits, FY1999-2000 to FY2014-2015
        • Table The UK - Cash ISA Market Summary, FY2009-2013
      • Cash ISA Breakdown
      • Stocks and shares ISAs
      • Sight and time deposits
      • National Savings and Investments (NS&I)
      • ISAs by region
      • ISAs by income group
      • Junior ISAs
      • ISAs by age and gender
    • ISA Interest Rates
    • Market Outlook
      • Total Number of ISAs
      • Cash ISAs
      • Stocks and Shares ISAs
      • Interest Rates
  • Consumers
    • Economic Backdrop
      • Labor market conditions
      • Disposable income
      • Inflation
      • Central bank rate
      • Energy bills
      • House prices
    • Saving Behavior
      • Savings ratio
      • Switching providers
      • Saving motivations
      • Sentiment towards banks
  • Competitive Landscape
    • Market Shares
    • ISA Interest Rates
      • Table The UK - ISA Market Competitor Interest Rates (%), FY2014-2015
  • Product Innovation
  • Regulation and Compliance
    • Recent Changes
      • Cash ISA allowance and NISA
      • Funding for Lending scheme
      • Financial Services Compensation Scheme
      • Capital Requirements Directive IV (CRD IV)
      • Financial Services (Banking Reform) Act 2013
    • Upcoming Regulations
      • Basel III
        • Table Recent and Upcoming Regulatory Changes, 2012-2018
  • Deals
  • News
  • UK Retail Banks
    • Barclays Plc - Company Overview
      • Barclays Plc - profile
        • Table Barclays Plc, Key Facts
      • Barclays Plc - main savings products
        • Table Barclays Plc, Main Savings Products
      • Barclays Plc - main competitors
      • Barclays Plc - board of directors
        • Table Barclays Plc, Board of Directors
    • HSBC Bank Plc - Company Overview
      • HSBC Bank Plc - profile
        • Table HSBC Bank Plc, Key Facts
      • HSBC Bank Plc - main savings products
        • Table HSBC Bank Plc, Main Savings Products
      • HSBC Bank Plc - main competitors
      • HSBC Bank Plc - board of directors
        • Table HSBC Bank Plc, Board of Directors
    • Lloyds Banking Group Plc - Company Overview
      • Lloyds Banking Group Plc - profile
        • Table Lloyds Banking Group Plc, Key Facts
      • Lloyds Banking Group Plc - main savings products
        • Table Lloyds Banking Group Plc, Main Products
      • Lloyds Banking Group Plc - main competitors
      • Lloyds Banking Group Plc - board of directors
        • Table Lloyds Banking Group Plc, Board of Directors
    • National Savings and Investments - Company Overview
      • National Savings and Investments - profile
        • Table National Savings and Investments, Key Facts
      • National Savings and Investments - main savings products
        • Table National Savings and Investments, Main Products
      • National Savings and Investments - main competitors
      • National Savings and Investments - board of directors
        • Table National Savings and Investments, Board of Directors
    • Nationwide Building Society - Company Overview
      • Nationwide Building Society - profile
        • Table Nationwide Building Society, Key Facts
      • Nationwide Building Society - main savings products
        • Table Nationwide Building Society, Main Products
      • Nationwide Building Society - main competitors
      • Nationwide Building Society - board of directors
        • Table Nationwide Building Society, Board of Directors
    • Santander UK Plc - Company Overview
      • Santander UK Plc - profile
        • Table Santander UK Plc, Key Facts
      • Santander UK Plc - main savings products
        • Table Santander UK Plc, Main Products
      • Santander UK Plc - main competitors
      • Santander UK Plc - board of directors
        • Table Santander UK Plc, Board of Directors
    • The Royal Bank of Scotland Group - Company Overview
      • The Royal Bank of Scotland Group Plc - profile
        • Table The Royal Bank of Scotland Group Plc, Key Facts
      • The Royal Bank of Scotland Group Plc - main savings products
        • Table The Royal Bank of Scotland Group Plc, Main Products
      • The Royal Bank of Scotland Group Plc - main competitors
      • The Royal Bank of Scotland Group Plc - board of directors
        • Table The Royal Bank of Scotland Plc, Board of Directors
  • Appendix
    • Methodology
    • Contact Timetric
    • About Timetric
    • Timetric's Services
    • Disclaimer

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