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ISA saving dips to lowest since turn of century

10 September 2018

The popularity of ISAs declined over the past year, however the amount people are choosing to save has risen, the latest government statistics have shown.

The number of people using ISAs in 2017-18 fell to its lowest level since the 1999-2000 tax year, following a similar drop during the previous tax year. The figures showed that around 10.8 million ISA accounts were subscribed to in 2017-18, down from 11.1 million the previous tax year. The number of cash ISAs fell by £697,000, while the number of stocks and shares ISAs bucked the trend with a rise of 246,000, HM Revenue & Customs reported.

Meanwhile, the amount saved into ISA accounts in 2017-18 increased to £69.3bn, up £7.8bn compared to 2016-17. The increase was driven by a rise in stocks and shares ISA subscriptions.

Laura Suter, personal finance analyst, AJ Bell, said: “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 2016-17 – 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 taxpayer 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.”

The first figures for the Lifetime ISA were also released since its launch in April 2017, providing an idea of its success. A total of 166,000 accounts have been opened and £517m saved, averaging £3,114 per account.

Suter added: “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.”

The data also showed a sharp increase in the Innovative ISA, which allows savers to invest in peer-to-peer lending. A total of 31,000 accounts have been opened, with £209m saved. This compares to 5,000 accounts opened in 2016-17, with £36m of money saved.

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