Halifax

15 Years of ISAs

18 March 2014

 

  • ISAs reach 15 year anniversary after being launched by the government on 6th April 1999
  • At end of 2013 tax year, £443 billion of funds held in tax free savings accounts
  • Savers utilising annual allowance each year now hold around £66,000 tax free savings
  • Cash ISAs allowance limits have outstripped inflation by 50%.

As the ISA hits its fifteenth year Halifax examines how the ISA has captured the nation's savers. Issuing a '15yrs ISA factsheet' Halifax looks at the depth and breadth of ISA saving across the UK.

In its first year over 9 million ISA accounts were opened, which was one in every five eligible adults. Now some 15 years later, and 14 million ISA accounts were opened in the last year, which equates to one in four eligible adults.

At the outset in 1999 the cash ISA annual allowance was £3000 increasing to £5,760 in 2013, which has seen the limit outstrip inflation by 50%.

Saving what they can when they can

Proving that the savings habit isn't reserved for the wealthy,over half of savers utilising the maximum cash allowance in 2013 had incomes of less than £20,000.

Approximately 7 million cash ISA holders have annual incomes between £10,000 and £19,999, this group have an average balance of £14,950 in tax free savings.

At the other end of the income scale, ISA savers with incomes over £150,000 or more hold on average £45,000 in tax free savings.

Richard Fearon, Head of Halifax Savings, said: "The average ISA balances held by savers on lower incomes shows that being able to save tax free really can encourage people to put aside a significant amount of what they earn. It is important that people understand how to maximise their savings, and protecting them from tax is one of the easiest ways to do this. 

“Fifteen years since the launch of the ISA, it's great to see the difference that these accounts have made in encouraging a positive savings habit. There remains, however, a real opportunity for more savers to realise the benefits of ISAs either by starting to save in them for the first time or by utilising the allowances that they already have.”

A lifetime of tax free saving

One of the key changes in the past five years has been the introduction of the Junior ISA (JISA). In 2012-13, 295,000 Junior ISA accounts were opened worth a total of £557m. Despite this, Halifax estimates that there is a £5.1bn Junior ISA ‘gap’ as the result of unused Junior ISA allowances. 

Richard Fearon, adds: "The launch of the Junior ISA enables a generation of savers the opportunity to protect their savings from tax. Parents have the chance to give their children a head start on their savings and teach them how to develop a positive savings habit, which they can take into adult life.”

Converting into an adult ISA when the child turns 18, JISAs are helping today’s child savers to amass a tax free lump sum that they can continue to build when they become an adult, or which they will be able to use to cushion the costs of key life stages, such as university fees, buying a home, having children or even retirement.  

Why savers save in an ISA

While one in three ISA savers view their ISA as another form of pension, while around 1.5 million people are currently saving in an ISA for their first home, with more than £4 billion earmarked in the last year alone for their deposit.

Two in three savers choosing to save in an ISA do so specifically as a way to earn tax free interest and one in ten do so to cover school, college or university fees.

To view the full ISA insight please see the Halifax '15yrs ISA factsheet'.

ENDS

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