HMRC stats show 76% of ISAs in cash

30 June 2020

Cash has proved king for ISAs according to latest HMRC figures, with an extra 1.4 million people choosing to open a Cash ISA in 2018/19 tax year compared to the previous year and cash accounts increasing to 76% of all ISAs.

In contrast, the number of investors subscribing their money to a stocks and shares ISA fell by 450,000, official figures from HM Revenue & Customs revealed.

In total, 11.2 million ISAs were opened last year, up from 10.1 million in 2017-18, with around £67.5 billion invested, an increase of £2.3 billion compared to previous years.

HM Revenue & Customs noted that the increase was largely driven by cash subscriptions, which increased by £7.3 billion, with 76% of the market now in cash accounts. In contrast, the amount invested in stocks and shares ISAs fell by £5.2 billion last tax year.

Rachael Griffin, tax and financial planning expert, Quilter, said: “It is encouraging that ISA subscriptions were up overall in the last tax year, which on the face of it seems positive. However, people have chosen to invest predominantly in cash ISAs.

“This increase may have been driven by the politically turbulent period resulting from Brexit looming over the country. This could have forced people to take lower risks with their savings as they were scared of volatile stock markets. Following the Coronavirus pandemic some of these savers may have felt that their decision has been vindicated.”

However, Griffin warned that while investors may have been spooked, they must take a long-term view to investing.

Griffin said: “Over a longer period compound returns can deliver rewards for investors that commit to saving through a stocks and shares ISA, and this is growing more appealing since the coronavirus pandemic has forced us into a historically low and likely prolonged interest rate environment meaning that the returns from cash will be meagre.”

The data also revealed a gender divide, with men and higher income holders more likely to save into stocks and shares ISAs, while lower income households were found to be much more likely to favour a cash ISA.

Meanwhile, Junior ISAs also grew in popularity, with a total of 954,000 accounts opened last year, up from 907,000 12 months earlier.

Griffin added: “The government will be pleased to see a steady increase in the opening of new JISA accounts. Since the government announced in the last budget that the subscription limit will more than double to £9,000, we expect to see subscription levels rise further after 2020/21. However, given that the average subscription level remains around £1,000, the impact of this change may be relatively minor.”

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