What do our ISA choices say about us?
More people added money to their ISA in the 2019/20 tax year compared to the year before. We look at what we can learn from the latest set of HMRC statistics.
In the 2019/20 tax year, we paid £75 billion into 13 million adult ISAs. This was up £7.1 billion from a year earlier.
This is the latest data HMRC have published. It is pre-pandemic, so the saving and investing habits of UK adults might have changed. But the principles still stand.
We’ve taken a look at these numbers to see what our ISA choices say about us.
This article isn’t personal advice. Tax rules can change, and their benefits depend on your personal circumstances. If you’re not sure if an ISA is right for you, ask for financial advice.
Which ISAs proved popular?
Both Cash ISAs and Stocks and Shares ISAs continued to be popular in the 2019/20 tax year, while the number of Lifetime ISAs (LISAs) more than doubled.
Some of this was likely due to the impact of the pandemic. A dip in the stock market towards the end of the last tax year, alongside more spare time, money and enthusiasm for investing could’ve all made a difference.
Next year’s figures might well show another increase.
Percentage split of ISAs opened in the UK
| Cash ISA | Stocks and Shares ISA | Lifetime ISA | Innovative Finance ISA |
|---|---|---|---|
| 74.6% | 21.0% | 4.2% | 0.3% |
Percentage split of amounts added
| Cash ISA | Stocks and Shares ISA | Lifetime ISA | Innovative Finance ISA |
|---|---|---|---|
| 65.3% | 32.4% | 1.7% | 0.6% |
Source: HMRC. Based on provisional data for the 2019/20 tax year, as at 5 April 2019, except where specified. Published on 8 June 2021.
WHAT ARE THE DIFFERENT TYPES OF ISAs?
The rise of the Lifetime ISA
Although LISAs make up a relatively small proportion of the total number of adult ISAs opened, their popularity’s increased.
The number of LISAs opened more than doubled – up from 223,000 to 545,000. The amount paid in also doubled to £1.26 billion.
LISAs only launched in 2017, so some of this popularity could be down to the product’s increased familiarity and reputation with savers and investors.
It might also be a sign that savers and investors have caught on to the fact there’s a government bonus available. If you’re between 18 and 39 years old, you can open a LISA and contribute up to £4,000 each year until you turn 50. The government will then add a further 25%.
So for every £4 you save, you get £1 extra – up to £1,000 per tax year.
You can withdraw money from a Lifetime ISA to buy your first home, or at age 60. Other withdrawals will usually mean a 25% government charge, so you could get back less than you put in. Using a LISA for later life complements a pension. ISA tax rules can change, and their benefits depend on your circumstances.
FIND OUT MORE ABOUT THE HL LIFETIME ISA
How popular are ISAs where you live?
When it comes to ISAs, London doesn’t stand as the capital.
In fact, the city has the lowest percentage of the adult population with an ISA in the whole of England, at 34%. Down in the South West, this figure is as high as 44%.
But it’s the South East that comes out top of the charts for average amount saved. Residents here have an average of £33,898 tucked away in an ISA.
| Location | Percentage of adult population with an ISA | Average amount in an ISA |
|---|---|---|
| North East | 35.5% | £23,117 |
| North West & Merseyside | 36.5% | £25,790 |
| Yorkshire & The Humber | 37.0% | £25,779 |
| East Midlands | 39.4% | £25,677 |
| West Midlands | 37.9% | £25,771 |
| East of England | 42.3% | £29,526 |
| London | 34.4% | £31,539 |
| South East | 43.2% | £33,898 |
| South West | 44.4% | £30,136 |
| Wales | 37.3% | £24,544 |
| Scotland | 31.5% | £29,861 |
| Northern Ireland | 28.8% | £21,547 |
Source: HMRC for the 2018/19 tax year, as at 5 April 2019, except where specified. Published on 8 June 2021.
Does gender impact our ISA preference?
More women held an ISA at the end of the 2018/19 tax year – 52% of women, compared to 48% of men.
But this doesn’t tell the whole story. In fact, the stats are arguably more interesting when you look at the split between cash over investments.
Women made up 56% of those paying into just a Cash ISA. Men on the other hand made up 57% of those using a Stocks and Shares ISA or both Stocks and Shares ISA and Cash ISAs.
This might explain why the average value of ISAs for women is £27,098, compared to £30,089 for men (a difference of £2,991, or 9.9% less). This is sometimes called the ‘gender ISA gap’.
A big factor at play here is the fact women earn less than men on average. And the more you earn, the more likely you are to have an investment ISA. It tends to reach a tipping point when our income reaches £30,000 – before then we’re more likely to have a Cash ISA, and after that we’re more likely to favour Stocks and Shares ISAs.
Investing your ISA allowance instead of holding cash has its benefits – the main one being that over the long term it’s likely to grow by more. But you should only think about investing if you’re not going to need the money for at least five years. You need to think about your goals and how much risk you’re happy taking when deciding what’s right for you.
The HL Stocks and Shares ISA
The HL Stocks and Shares ISA is our most popular account.
If you’re thinking of investing your ISA allowance, the good news is it’s easy to get started. It takes about ten minutes to apply online.
You can start an ISA from £100 or £25 per month. All you need is your debit card and national insurance number. Remember, unlike the security offered by cash, investments will rise and fall in value, so you could get back less than you put in. Investing should typically only be considered to help reach your longer-term goals.
