The latest statistics from HM Revenue & Customs (HMRC) show that the number of adult ISA accounts held in 2017/18 fell to 10.8 million in 2017/18, from 11.1m a year earlier.
But there were changing fortunes for the two different investment types available. Cash ISAs fell by 697,000, while the number subscribing to stocks and shares ISAs rose by 246,000. The proportion of cash ISAS to stocks ISAs fell to 72% from 77%.
The amount of funds subscribed to has actually increased over that period – to £69bn, up £7.8bn on a year earlier.
Investment experts cited the “paltry” interest rates being offered by banks and building societies, couple with high inflation, as putting cash ISA savers in a position where they will be losing spending power in real terms.
The personal savings allowance, offering £1,000 of interest tax-free for basic rate taxpayers or £500 for higher-rate taxpayers is “diminishing the appeal” for cash ISAs, believes AJ Bell personal finance analyst Laura Suter, but that doesn’t mean the end for the cash ISA as an option.
“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,” said Suter.
An area of interest to investment professionals is the proportion of money being poured into junior ISAs. Some 57% of funds are into cash vehicles. Suter noted that, with them only being accessible when the child reaches 18 years-old, they are the “ideal long-term investment”, therefore the cash option “makes little sense for many savers.”
The Lifetime ISA, which allows people to save up to £4,000 towards a property or retirement – with the government topping it up by 25%, is proving popular. Some 166,000 accounts have been opened, averaging £3,114 per account.
Kevin Reed is one of the UK’s most senior accounting and finance journalists. He is a former editor of Accountancy Age and Financial Director, and writes regularly on corporate and professional services governance.
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