One million new investors take out ISAs, but stock and share accounts dip

The number of people taking out stocks and shares Isas (individual savings accounts) has dipped, although those using this tax-free way to save and invest lifted by more than one million in the UK.

The number of people signing up to stocks and shares Isas in the 2018-19 tax year fell by 450,000 from 2017-18, according to data from the HM Revenue & Customs released on Thursday.

However, the amount of overall savers taking out adult Isa subscriptions rose to 11.2 million in 2018-19 from 10.1 million the year before.

Between them, they invested £67.5bn, an increase of £2.3bn on 12 months ago. This was driven by the rise in cash Isa subscriptions, which rose by £7.3bn, while the amount subscribed to stocks and shares Isas fell by £5.2bn.

The fluctuating popularity of ISAs

Isas were introduced in Britain in 1999 and are designed to help people save cash without being subject to tax deductions.

Investors can save up to £20,000 a year (for the 2020/21 tax year), across a number of different types of Isas. This can be a cash Isa, a stocks and shares ISA, an innovative finance Isa, a Help to Buy Isa, a Lifetime Isa or a mixture of all of them.

Their popularity has fluctuated over the years, with the high point coming in 2010/11 when around 15 million people used this method to invest.

However, most people with a cash Isa will have seen their interest rate plummet in the last few months. Also, recent tax changes mean that for most savers, cash Isas have ceased to hold much advantage over regular savings accounts.

The average subscription in a stock and shares Isa in 2018-19 was £9,331 and £5,187 in cash Isas, said the report.

Low interest rates have hit all savings accounts

Interactive Investor personal finance campaigner Myron Jobson said: “Uncertainty around what Brexit might look like in the 2018/2019 tax year may well have soured investor appetite for stocks and shares Isas, combined with a tough quarter four for markets in 2018.”

Jobson added: “Cash savings rates have languished for over a decade since the base rate was cut to help the UK economy recover from the financial crisis. While cash savings is imperative for short term funding requirements and to serve as a rainy-day pot, those who can afford to lock a portion of their cash away for at least five years could be missing out long term.”

The amount of cash put into their Isa fell 6% to an average of £6,049 in 2018-19 compared to the year before.

The average total adult Isa pot is £23,380, with those on lower salaries tending to stick to cash Isas.

The total value of all adult Isa holdings in this period was £584bn, a 4% decline on the year before, driven by the lower market value of funds held in stocks and share Isas.

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    Roger Baird

    Roger Baird is News Editor at Finixio. He has worked as a financial journalist for 20 years reporting on companies, capital markets and the UK economy.


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