The number of adults paying into ISAs reached a 13-year high last year, as savers continued to plough billions into cash ISAs.
Official figures from HM Revenue and Customs showed that around 15 million adult ISA accounts were subscribed to in 2023/24, up from 12.4 million the previous year.
Cash proved particularly appealing, with the amount paid into cash ISAs soaring by 67% year-on-year from £41.6 billion to £69.5 billion.
Laura Suter, director of personal finance at AJ Bell, said: “ISAs are back in fashion – for the first time in 13 years the number of ISA accounts adults paid into has topped 15 million.
“The rise in cash ISAs has been huge, with more than double paid in compared to just two years earlier. Whether rising interest rates, frozen tax bands equating to higher tax bills or rumours of ISA limits being cut are what’s driving this trend, the nation has clearly rediscovered its love of ISAs.”
Stocks and shares ISAs also enjoyed a 11% increase to £31 billion, while Lifetime ISA subscriptions increased to £2.35 billion.
However, the data showed a persistent gender gap, with women making up 56% of cash ISA holders, while they represent just 42% of stocks and shares ISA holders.
Additionally, HMRC said more parents are also opening ISA accounts for their children, and funnelling more money into the accounts, with nearly 1.4 million Junior ISAs subscribed to in 2023/24, up from 1.25 million in 2022/23.
With the Chancellor already outlining her commitment to encourage more UK investors to use stocks and shares ISAs, it raises questions whether the latest bumper figures will incentivise Rachel Reeves to make changes to ISA allowances to achieve her goal.
Damon Hopkins, head of DC workplace savings at Broadstone, said: “Cash certainly remains king in the UK, with over two thirds of subscriptions directed to cash ISAs despite the long-term growth potential that other assets can offer savers.
“It may also reflect continued rumours around possible reforms to the ISA market with the Treasury keen to funnel more savings into UK stocks and therefore could limit the annual allowance for Cash ISAs.
“Building the nation’s savings potential is always a positive but we know that there is a significant problem when it comes to under-saving for retirement. Policymakers should see ISA reform and pension policy as two sides of the same coin, encouraging a culture of regular, long-term saving and ensuring today’s cash-heavy habits and the ongoing high cost of living don’t translate into tomorrow’s retirement shortfall.”
Jason Hollands, managing director of Bestinvest, said: “Given this vast pool of assets held out of the reach of the taxman, it is no wonder then that some City firms have been urging the Chancellor to take steps that would drive more savers into the UK stock market both through limiting the amount that can be held in cash and narrowing the remit of Stocks & Shares ISAs to have a domestic bias.
“For now, it seems, the Chancellor’s plans to cut the cash ISA allowance have been put on ‘pause’ but that does not mean reform of ISAs is off-the-table completely for the remainder of this parliament.”
Main image: james-lee-YIy1cd3xN4w-unsplash
