ISAs - UK - August 2009

Table of Contents

• Issues in the Market
• Key issues
• Market definitions
• Abbreviations
• Market in Brief
• ISA penetration increases
• Subscriptions are also up
• Wider savings environment
• New industry developments
• Provider rankings
• ISA distribution mix
• Advertising activity
• The typical ISA subscriber is an AB aged 45+
• Saver behaviour
• Saver attitudes
• Internal Market Environment
• Key points
• Recent changes to simplify the scheme...
  • Figure 1: Recent and proposed changes to the ISA scheme, 2004-20
• ... have been welcomed by the investment industry...
• ... but there' s still scope for improvement say some
• Allowance upped
• New scheme structure
  • Figure 2: Illustration of annual investment limits, 2009/10 versus 2010/11
• ISA transfers to be speeded up
• Tax relief on equity ISAs a red herring?
• Calls to reinstate 10% tax credit
• Broader Market Environment
• Key points
• Summary of the main market and macroeconomic developments
• Less appetite for spending
• Implication
• With interest rates slashed, savers suffer reduced returns
  • Figure 3: Average annual changes in the bank base rate, CPI and RPI - UK, 2000-09
• Implications for savers
• Stockmarket turmoil -- have we passed the bottom?
  • Figure 4: FTSE 100 and FTSE All Share -- daily index movements, May 2000-May 2009
• Implication for investors
• The crunch effect
• Number of higher-rate taxpayers declined in 2008/09
  • Figure 5: Number of basic and higher-rate taxpayers, 1998/99-2008/09
• Insight and implication
• Another target group, the over-50s, are growing in number
  • Figure 6: Size of the UK population, by age group, 1999-2013
• Insight and implication
• Competitive Context
• Key points
• ISAs complement other savings and investment products
• Cash ISAs are the second-most popular savings and investment product
  • Figure 7: Penetration of ISAs and other savings and investment products, April 2009
• Measuring the cash ISA gap
• Market inhibitors
• Cash ISA rates fare poorly against taxable accounts
• Investors shift in favour of bonds
• Strengths and Weaknesses in the Market
  • Figure 8: ISAs -- strengths, weaknesses, opportunities and threats, 2009
• Market Size and Forecast
• Key points
• 220 billion held in ISAs
  • Figure 10: Value of funds held in ISAs, 2004-08
• New ISA subscriptions rose 5% in 2008/09
  • Figure 11: Number of ISA accounts and amounts subscribed, 1999-2000-2008/09
• Insight and implication
• Cash ISA subscriptions increased in 2009/10, while equity ISA subscriptions fell
  • Figure 12: Number of ISA accounts and amounts subscribed, segmented by type, 1999-2000-2008/09
• Implication
• Average subscription to equity ISA remained at previous year' s level
  • Figure 13: Average subscription per account, 1999-2000-2008/09
• 2008 saw ISA investors become more cautious
  • Figure 14: Total net retail unit trust/OEIC sales and net retail ISA sales, 2004-08
• Confidence returning?
• Winners and losers
• ISA market forecast: A mixed bag
  • Figure 15: Forecast of new ISA business, by component, 2008/09-2013/14
• Factors incorporated
• Market Share
• Key points
• Cash ISA market has seen some new entrants over the past couple of years
• M&A activity shakes up the cash ISA rankings
  • Figure 16: Provider share of cash ISA customer base, April 2009
• Government-backed providers have grown share
  • Figure 17: Top 11 cash ISA providers, by customer share (rebased), 2009
• Insight and implication
• Building societies fare well in the cash ISA market
  • Figure 18: Share of cash ISA balances outstanding, by main types of provider, March 2009
• Leading ISA fund managers
• Fidelity tops ISA fund rankings
  • Figure 19: Top 15 unit trust/OEIC ISA fund managers, by value of funds under management, 2007-09
• Steady consolidation
• Companies and Products
• Selected company profiles
• Fidelity
• Legal & General
• Lloyds Banking Group
• Nationwide Building Society
• RBS Group
• Grupo Santander
• Brand Communication and Promotion
• Key points
• Many ISA providers cut back their ISA advertising in 2008/09
  • Figure 20: Total advertising expenditure on ISAs, by product category, 2004/05-2008/09
• Insight and implication
  • Figure 21: Average monthly adspend on ISAs as a percentage of annual adspend, 2008
• The press is the preferred media channel
  • Figure 22: Proportional distribution of adspend on ISAs, by main media, 2004/05-2008/09
• Halifax maintains position as largest ISA advertiser
  • Figure 23: Top 15 ISA advertisers, 2007/08 and 2008/09
• Channels to Market
• Key points
• Cash ISAs are predominately sold direct to consumers
• IFAs are the top advice source for equity ISA investors
  • Figure 24: Preferred sources of investment advice, by cash and equity ISA holders, April 2009
• Equity ISAs: the main routes to market
• All channels experienced a decline in gross ISA fund sales in 2008
  • Figure 25: Gross retail sales of unit trust and OEIC ISAs, by distribution channel, 2004-08
• Insight and implication
• Fund supermarkets continue to be the dominant sales channel
  • Figure 26: Proportional representation of gross retail unit trust and OEIC ISA sales, by channel, 2004-08
• The rise of the fund supermarkets
• What they offer
• The leading fund platforms
• The Consumer -- Value of Investible Assets
• Key points
• Survey background
• Half of UK adults have some level of savings
  • Figure 27: Value of savings and other investible assets, April 2009
• Wealth increases with age
  • Figure 28: Value of savings and other investible assets, by age, April 2009
• Insight and implication
• One in four ABs are in the affluent to HNW category
  • Figure 29: Value of savings and other investible assets, by gender and socio-economic group, April 2009
• The Consumer -- ISA Ownership
• Key points
• Cash ISA is the second most popular savings product
  • Figure 30: Savings and investment products owned, by age, April 2009
• Consumers favour fixed-rate products
• Take-up of ISAs has increased over the past year...
  • Figure 31: Change in ISA penetration between 2008 and 2009
• Insight and implication
• ...but there' s scope to expand the market further
  • Figure 32: ISA gap assessment, April 2009
• Insight and implication
• 55-64-year-olds use ISAs the most
  • Figure 33: Savings and investment products owned, by age, April 2009
• Insight and implication
• Gender variation
  • Figure 34: Savings and investment products owned, by gender and socio-economic group, April 2009
• Insight and implication
• ABs really like ISAs
• Insight and implication
• Personal wealth is a key determiner of ISA ownership
  • Figure 35: Savings and investment products owned, by level of investible assets, April 2009
• Insight and implication
• CHAID analysis identifies older ABs as the main target group for ISAs
  • Figure 36: Target groups identified for the ISA market, April 2009
• The Consumer -- Investor Behaviour
• Key points
• Around one in four contributed the maximum to their cash ISA
  • Figure 37: Agreement with statements about ISA usage, April 2009
• Insight and implication
• Some customer churn
• Insight and implication
• More make regular payments than deposit lump sums
• Insight and implication
• Over a fifth of savers withdrew money from their cash ISA in 2008/09
  • Figure 38: Agreement with awareness statement, April 2008
• Regular saver products will appeal most to the under-35s
  • Figure 39: Agreement with statements about ISA usage, by age, April 2009
• Insight and implication
• Men are much more inclined to deposit lump sums into their cash ISA
  • Figure 40: Agreement with statements about ISA usage, by gender and socio-economic group, April 2009
• Appendix -- Ownership of ISAs
  • Figure 44: Ownership of cash and equity ISAs, by demographic, April 2009
• Appendix -- Demographic Profile of ISA Subscribers
  • Figure 45: Demographic profile of cash and equity ISA subscribers, April 2009