Research shows enduring appeal of the ISA as a savings tool

News - Savings

Written by Ray Clancy

Wednesday, 17 February 2010 09:16

ISAs are an ever popular method of saving money and their popularity has increased by 53% in the decade since they were launched, according to new research.

Over a third, 37%, of UK households have an ISA and growth is highest among the under 25s and fastest among female savers, the research from the Halifax has found.

The biggest increase in ISAs has been in Scotland and cash ISAs have accounted for 58% of accounts compared with 42% in stocks and shares.

The value of cash ISA savings has risen eleven fold in real terms since their introduction and the amount invested in cash ISAs increased by 5% in 2009 to £169 billion.

‘It’s clear that ISAs hold an enduring appeal with savers with take up growing some 53% over its history. It’s encouraging to see that the youngest savers are also keen to benefit from the tax free status the ISA wrapper offers with growth highest amongst the under 25s,’ said Suren Thiru, economist at Halifax.

The South East has the highest proportion of households with an ISA, some 44%), marginally higher than the East of England with 43% and the South West at 42%. In contrast, only 18% of households in Northern Ireland have an ISA, the lowest in the UK.

The number of ISA savers under the age of 25 has risen by 88% from 605,000 in 1999/2000 to 1,140,000 in 2006/07. The 55 to 64 age group recorded the second highest increase at 67%. The 25 to 34 year old age group saw the smallest rise at 24%.

Between 1999/00 and 2006/07, the number of female savers subscribing to an ISA rose by 52% to 6,335,000. This significantly exceeded the 35% rise in male savers over the same period, the research found. The number of male ISA savers continues to exceed the number of female savers but there were just 1% more male than female ISA savers in 2006/07 compared to 14% more in 1999/00.

The biggest percentage increase in the number of ISA savers between 1999/00 and 2006/07 was in Scotland at 57%, followed by the North East, 53%, and the East Midlands 53%. West Midlands recorded the lowest growth at 34%.

Cash accounted for 58% of the value of all ISA savings in 2009 compared with 42% in the stock and shares component. This is the reverse of the situation in 1999/2000 when stocks and shares accounted for 90% of total ISA funds against 10% in cash.

The amount invested in cash ISA deposits has increased from £12.3 billion at the end of the 1999/2000 tax year to £169.5 billion in December 2009.