Report: ISAs - UK - June 2007 TOC

Issues in the Market
Report coverage
Key issues
Market definitions
The main types of ISA product
Stakeholder ISAs
Abbreviations
Market in Brief
Healthy sales growth, particularly in the maxi ISA market
The future looks even brighter
Demand drivers
Recent developments
Movement in the cash ISA rankings
Competition is intensifying
Fund platforms are now a major force in the distribution landscape
Providers put greater investment into advertising and promotion
Key consumer research findings -- ISA penetration
- Figure 1: Ownership of ISA products, 2006 and 2007
Profile of the typical ISA subscriber
Investment behaviour
Cross-selling and targeting new prospects
Broader Market Environment
Key points
Saving activity is set to pick up...
- Figure 2: Total PDI, consumer expenditure and savings, 2003-12
Implication
...as illustrated by the real growth in savings per capita
- Figure 3: Average savings per UK adult aged 16+, at current and constant 2003 prices, 2003-12
Implication
A robust economy...
- Figure 4: GDP annual growth and proportion of workforce unemployed -- UK, 1997-2007
Outlook
...but inflation is up
- Figure 5: Average annual changes in the bank base rate, CPI and RPI -- UK, 1997-2007
Implication and opportunity
The ' money illusion effect'
The 2000-03 bear market benefited the sale of cash ISAs...
...but had a detrimental effect on the sale of equity ISAs
An improving picture for equity investment
- Figure 6: FTSE 100 and FTSE All Share -- daily index movements, April 1997-March 2007
A cautiously optimistic outlook
A growing pool of higher-rate taxpayers
- Figure 7: Number of basic and higher-rate taxpayers, 1998/99-2007/08
Implication and opportunity
ABC1s account for a growing proportion of the adult population
- Figure 8: Distribution of the UK adult population aged 15+, by socio-economic group, 1997-2012
Implication and opportunity
Another target group, the over-45s are also growing in number
- Figure 9: Size of the UK population, by age group, 1997-2012
Implication and opportunity
Internal Market Environment
Key points
Tax appeal
ISA regime extended indefinitely
CTF to roll over into ISAs
Current scheme structure is perceived as complex
- Figure 10: Illustration of annual investment limits, from 6 April 2005 to 5 April 2008
ISA limits to rise in 2008
Key changes at a glance
ISAs can hold a wide choice of investments...
... and a broad spectrum of funds
Corporate bonds are losing their appeal...
...while property may also be losing its shine
Self-select ISAs are a very niche area of the market
Cash ISAs continue to be the most popular
ISAs represent a falling proportion of net retail unit trust/OEIC ISA sales
- Figure 11: Net retail unit trust/OEIC sales and proportion represented by ISAs, 2000-06
Implication
Tax relief on equity ISAs a red herring?
PEPs and TOISAs
Competitive Context
Key points
ISAs complement not compete
Measuring their popularity against other product types
- Figure 12: Penetration of ISAs and other savings and investment products, March 2007
The ISA gap proves there is substantial scope to increase take-up
Market inhibitors
Limits are based on contributions not balances
ISAs versus pensions
Strengths and Weaknesses in the Market
- Figure 13: ISAs -- SWOT analysis, 2007
Market Size and Forecast
Key points
ISA sales continue to soar
- Figure 15: New mini and maxi ISAs opened and amounts subscribed, 2000/01-2006/07
Real growth in ISA subscriptions
- Figure 16: Total amounts subscribed in mini and maxi ISAs, at current and constant prices, 2000/01-2006/07
Investors show more interest in mini equity ISAs...
- Figure 17: New mini ISAs opened and amounts subscribed, by type, 2000/01-2006/07
Implication
...but they pay less into them, on average
- Figure 18: Average subcription per mini ISA, by type, 2000/01-2006/07
Implication and opportunity
Healthy rise in maxi ISA investment
- Figure 19: Amounts invested in maxi ISAs, by component type, 2000/01-2006/07
Implication and opportunity
Average maxi ISA subscriptions in 2006/07 highest on record
- Figure 20: Average subcription per maxi ISA, 2000/01-2006/07
The size of the ISA market under the new simplified structure
- Figure 21: Illustration of new ISA business under new structure, 2000/01-2006/07
Implication
Market forecast -- strong sales growth predicted
- Figure 22: Forecast of new ISA business, by component, 2006/07-2011/12
Factors incorporated
Segment Performance
Key points
More than £180 billion held in ISAs
- Figure 23: Value of funds held in each of the three ISA components, 2000-06
OEICs are the largest segment of the stocks and shares component
Implication
Market Share
Key points
Market leader Halifax has a 22% share of the cash ISA customer base
- Figure 24: Provider share of mini cash ISA customer base, March 2007
Halifax and HSBC are the main gainers in 2006/07...
- Figure 25: Change in provider share of mini cash ISA customer base (top 11 only), 2006 and 2006
...while Nationwide loses share
A branch network is a major advantage
Smaller players and new entrants
Reasons for non-entry
- Building societies fare well in the cash ISA market
- Figure 26: Share of ISA balances outstanding (cash component only), by main types of provider, February 2007
Implication
Leading ISA fund managers
Halifax moves into pole position
- Figure 27: Top 15 unit trust/OEIC ISA fund managers, by value of funds under management, 2005-07
Top four account for two fifths of the market
Companies and Products
Key points
Product differentiation
Best cash ISA rates tend to be offered by smaller players
- Figure 28: Highest-paying cash ISAs with a minimum balance of £10, mid-May 2007
Additional restrictions
Switchers targeted
Price is less of a factor in the equity ISA market
New partnerships
Selected company profiles
HBOS
Nationwide Building Society
Lloyds TSB Group
Legal & General
Brand Communication and Promotion
Key points
Big increase in cash ISA adspend
- Figure 40: Total advertising expenditure on ISAs, by product category, 2002/03-2006/07
Implication
The press is the preferred media channel
- Figure 41: Proportional distribution of adspend on ISAs, by main media, 2002/03-2006/07
Legal & General maintains position as largest ISA advertiser
- Figure 42: Top 15 ISA advertisers, 2005/06 and 2006/07
Channels to Market
Key points
Most cash ISAs are sold direct
People taking out equity ISAs often need advice
Four fifths of equity ISA holders are Internet users
- Figure 43: Internet penetration and online activity, by ISA holders, March 2007
Implication and opportunity
Equity ISAs and the main routes to market
ISA sales via fund supermarkets are growing at the fastest rate
Figure 44: Gross retail sales of unit trust and OEIC ISAs, by distribution channel, 2000-06
Fund supermarkets have become the dominant channel
- Figure 45: Proportional representation of gross retail unit trust and OEIC ISA sales, by channel, 2000-06
The growth of fund supermarkets
Leading brands
What they offer
The Consumer -- Product Penetration
Key points
Survey background
Take-up of ISAs has increased over the past year
- Figure 52: Ownership of ISAs and other savings and investments, 2006 and 2007
Implication
One in four adults have a mini cash ISA
Preference for cash over equities
Scope for expanding the ISA market
A note about life insurance ISAs
The extent of the ISA gap
- Figure 53: Cross-analysis of product ownership, March 2007
Implication and opportunity
Gender enigma
- Figure 54: Ownership of ISAs and other savings/investments, by gender, age and socio-economic group, March 2007
Implication and opportunity
The over-45s are a key segment
Implication and opportunity
ABs find ISAs particularly appealing...
Implication and opportunity
...as do married couples
- Figure 55: Ownership of ISAs and other savings/investments, by marital status, lifestage, Mintel' s Special Groups and tenure, March 2007
Implication and opportunity
Wealth is a major determiner
- Figure 56: Ownership of ISAs and other savings/investments, by working status, gross annual household income, region and ACORN category, March 2007
Implication and opportunity
Waitrose and M&S shoppers record high penetration of ISAs
- Figure 57: Ownership of ISAs and other savings/investment types, by new technology usage, newspaper readership, commercial TV viewing and supermarket usage, March 2007
Implication and opportunity
Over two thirds of ISA holders are aged 45+
- Figure 58: Profile of ISA holders, by gender, age, socio-economic group and region, March 2007
Implication and opportunity
The Consumer -- Sourcing Cash ISAs
Key points
More than two thirds of savers obtained their cash ISA from a bank
- Figure 59: Type of provider obtained cash ISA from, March 2007
Different types of ISA provider attract different types of customer
- Figure 60: Customer profile of the main types of cash ISA provider, by gender, age, socio-economic group and region, March 2007
Implication and opportunity
The Consumer -- Attitudes and Behaviours
Key points
Mini stocks and shares ISA holders are more likely to take advice...
- Figure 61: Agreement with statements about ISA usage, by type of ISA held, March 2007
Implication
These proportions are likely to be understating the actual amount of both maxi and mini equity ISA sales arranged with advice (including advice delivered by sales agents in-branch or over the telephone). Some of the largest ISA providers have reported to Mintel that the vast majority of sales are generated face to face via a branch-based adviser.
...while maxi ISA subscribers are most likely to shop around
Implication
Mini equity ISA investors prefer making regular payments
Implication
Single-premium ISAs ideal for lump-sum investment
Implication
Proportion intending to invest the full cash ISA allowance falls
Implication
Many cash ISA savers are reluctant to make withdrawals
Customer churn
Implication
A quarter of ISA holders are saving for their future
Implication
Customers of ' other' providers are more likely to shop around
- Figure 62: Agreement with statements about ISA usage, by type of provider (cash ISA holders only), March 2007
Implication and opportunity
Men are more likely to use the Internet to find the best ISA deals
- Figure 63: Agreement with statements about ISA usage, by gender and socio-economic group, March 2007
Implication
Three in ten 16-34-year-olds are saving for their future
- Figure 64: Agreement with statements about ISA usage, by age, March 2007
Implication

ISAs - UK - June 2007

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