Individual Savings Accounts in the UK – Key Trends and Opportunities to 2018

Interest rates are at their lowest levels since individual savings accounts (ISAs) began, which significantly reduces consumers’ commitment to saving. As a result, those consumers who can afford to save are starting to opt either for stocks and shares accounts, or pay off long-standing debts with higher interest rates.

The average rate offered on cash ISAs fell from 2.55% at the start of 2012 to 1.74% in February 2013, and to just 1.64% at the start of 2014. The average rates for savings accounts fell from 5.09% in 2008 and 1.48% in 2014, which highlights the impact of the recession and the availability of cheap funds for the banks.

Eight out of every 10 ISAs opened in FY2013–2014 were still cash ISAs, however, as savers remained risk-averse, despite banks offering the worst interest rates on record. Stocks and shares ISAs are starting to recover however, following a substantial decline in the number for accounts from FY2010–2011 to FY2011–2012. The amount subscribed to stocks and shares ISAs has increased considerably since FY2009 – from GBP12.5 million to GBP18.4 million, which suggests that a smaller percentage of wealthier people, who can afford the increased risk, are filling these ISAs to the limit.

The BoE’s central bank rate has remained at 0.5% since 2009, providing banks with an unparalleled level of cheap funds, meaning that the banks have significantly less need to compete for funds from consumers. The introduction of the government’s Funding for Lending scheme – providing up to GBP80.0 billion to major banks to subsidize mortgage lending – has further reduced the banks’ need for funds, which has had a considerable impact on the savings market. There have been an estimated 2,560 savings products cut since the introduction of the Funding for Lending scheme in August 2012, as of November 2014.

Real wages endured negative growth for most of the 2008–2014 period, despite positive growth for the last three months of 2014. This, combined with soaring house prices and energy bills, means that consumers were squeezed during the recession, and are subsequently less able to set aside amounts every month for savings accounts. House prices in the UK increased by 18.6% between 2009 and 2014 – rising by 9.9% in 2014 alone, according to Nationwide’s house price index. Research by consumer body Which? found that the price of gas and electricity grew by 127% from 2003–2004 to 2013–2014, and that the average household is paying GBP410.0 more per year for energy, despite using less.

Several changes have been made to ISA regulation to try to stimulate the industry in the face of low interest rates, since the Funding for Lending scheme. New ISAs (NISAs) were introduced in the April 2014 budget, which increased the upper annual limit for an individual to GBP15,000.0. Tax advantages were also introduced in Chancellor George Osborne’s 2014 Autumn Statement, allowing ISAs to pass tax-free to a spouse after death. Osborne also announced that there will no longer be capital gains tax for profits of under GBP11,000.0 on stocks and shares ISAs.

Scope

• This report provides market analysis, information and insights relating to the UK ISA industry

• It provides a breakdown of the different forms of ISA in the UK

• It analyzes drivers and the outlook for the market

• It provides information on the main banks in the UK market

• It covers news and regulatory developments

Key Highlights

Consumer credit growth has shown consistent signs of growth in 2014, for the first time since before the financial crisis.

This is in a large part due to consumer confidence also recording a positive number for the first time since the credit crunch, low interest rates and a steadily growing GDP, as nearly every category of lending has grown up to July 2014.

Demand for and availability of credit also grew in both the second and third quarters of 2014, which has been a key factor.

Reasons to buy

Gain an understanding of the UK ISA industry.

Companies mentioned

Santander UK Plc

Royal Bank of Scotland Group Plc

HSBC Bank Plc

Barclays Plc

Lloyds Banking Group Plc

HSBC

Nationwide

Table of Contents

1 Executive Summary

2 Introduction

2.1 What is this Report About?

2.2 Definitions

2.3 Methodology

3 Market Analysis

3.1 Market Size

3.1.1 Cash ISAs

3.1.2 Cash ISA Breakdown

3.1.3 Stocks and shares ISAs

3.1.4 Sight and time deposits

3.1.5 National Savings and Investments (NS&I)

3.1.6 ISAs by region

3.1.7 ISAs by income group

3.1.8 Junior ISAs

3.1.9 ISAs by age and gender

3.2 ISA Interest Rates

3.3 Market Outlook

3.3.1 Total Number of ISAs

3.3.2 Cash ISAs

3.3.3 Stocks and Shares ISAs

3.3.4 Interest Rates

4.1 Economic Backdrop

4.1.1 Labor market conditions

4.1.2 Disposable income

4.1.3 Inflation

4.1.4 Central bank rate

4.1.5 Energy bills

4.1.6 House prices

4.2 Saving Behavior

4.2.1 Savings ratio

4.2.2 Switching providers

4.2.3 Saving motivations

4.2.4 Sentiment towards banks

5 Competitive Landscape

5.1 Market Shares

5.2 ISA Interest Rates

6 Product Innovation

7.1 Recent Changes

7.1.1 Cash ISA allowance and NISA

7.1.2 Funding for Lending scheme

7.1.3 Financial Services Compensation Scheme

7.1.4 Capital Requirements Directive IV (CRD IV)

7.1.5 Financial Services (Banking Reform) Act 2013

7.2 Upcoming Regulations

7.2.1 Basel III

9 News

10 UK Retail Banks

10.1 Barclays Plc – Company Overview

10.1.1 Barclays Plc – profile

10.1.2 Barclays Plc – main savings products

10.1.3 Barclays Plc – main competitors

10.1.4 Barclays Plc – board of directors

10.2 HSBC Bank Plc – Company Overview

10.2.1 HSBC Bank Plc – profile

10.2.2 HSBC Bank Plc – main savings products

10.2.3 HSBC Bank Plc – main competitors

10.2.4 HSBC Bank Plc – board of directors

10.3 Lloyds Banking Group Plc – Company Overview

10.3.1 Lloyds Banking Group Plc – profile

10.3.2 Lloyds Banking Group Plc – main savings products

10.3.3 Lloyds Banking Group Plc – main competitors

10.3.4 Lloyds Banking Group Plc – board of directors

10.4 National Savings and Investments – Company Overview

10.4.1 National Savings and Investments – profile

10.4.2 National Savings and Investments – main savings products

10.4.3 National Savings and Investments – main competitors

10.4.4 National Savings and Investments – board of directors

10.5 Nationwide Building Society – Company Overview

10.5.1 Nationwide Building Society – profile

10.5.2 Nationwide Building Society – main savings products

10.5.3 Nationwide Building Society – main competitors

10.5.4 Nationwide Building Society – board of directors

10.6 Santander UK Plc – Company Overview

10.6.1 Santander UK Plc – profile

10.6.2 Santander UK Plc – main savings products

10.6.3 Santander UK Plc – main competitors

10.6.4 Santander UK Plc – board of directors

10.7 The Royal Bank of Scotland Group – Company Overview

10.7.1 The Royal Bank of Scotland Group Plc – profile

10.7.2 The Royal Bank of Scotland Group Plc – main savings products

10.7.3 The Royal Bank of Scotland Group Plc – main competitors

10.7.4 The Royal Bank of Scotland Group Plc – board of directors

11 Appendix

11.1 Methodology

11.2 Contact GlobalData

11.3 About GlobalData

11.4 GlobalData’s Services

11.5 Disclaimer

List of Tables

1 Executive Summary

2 Introduction

2.1 What is this Report About?

2.2 Definitions

2.3 Methodology

3 Market Analysis

3.1 Market Size

3.1.1 Cash ISAs

3.1.2 Cash ISA Breakdown

3.1.3 Stocks and shares ISAs

3.1.4 Sight and time deposits

3.1.5 National Savings and Investments (NS&I)

3.1.6 ISAs by region

3.1.7 ISAs by income group

3.1.8 Junior ISAs

3.1.9 ISAs by age and gender

3.2 ISA Interest Rates

3.3 Market Outlook

3.3.1 Total Number of ISAs

3.3.2 Cash ISAs

3.3.3 Stocks and Shares ISAs

3.3.4 Interest Rates

4.1 Economic Backdrop

4.1.1 Labor market conditions

4.1.2 Disposable income

4.1.3 Inflation

4.1.4 Central bank rate

4.1.5 Energy bills

4.1.6 House prices

4.2 Saving Behavior

4.2.1 Savings ratio

4.2.2 Switching providers

4.2.3 Saving motivations

4.2.4 Sentiment towards banks

5 Competitive Landscape

5.1 Market Shares

5.2 ISA Interest Rates

6 Product Innovation

7.1 Recent Changes

7.1.1 Cash ISA allowance and NISA

7.1.2 Funding for Lending scheme

7.1.3 Financial Services Compensation Scheme

7.1.4 Capital Requirements Directive IV (CRD IV)

7.1.5 Financial Services (Banking Reform) Act 2013

7.2 Upcoming Regulations

7.2.1 Basel III

9 News

10 UK Retail Banks

10.1 Barclays Plc – Company Overview

10.1.1 Barclays Plc – profile

10.1.2 Barclays Plc – main savings products

10.1.3 Barclays Plc – main competitors

10.1.4 Barclays Plc – board of directors

10.2 HSBC Bank Plc – Company Overview

10.2.1 HSBC Bank Plc – profile

10.2.2 HSBC Bank Plc – main savings products

10.2.3 HSBC Bank Plc – main competitors

10.2.4 HSBC Bank Plc – board of directors

10.3 Lloyds Banking Group Plc – Company Overview

10.3.1 Lloyds Banking Group Plc – profile

10.3.2 Lloyds Banking Group Plc – main savings products

10.3.3 Lloyds Banking Group Plc – main competitors

10.3.4 Lloyds Banking Group Plc – board of directors

10.4 National Savings and Investments – Company Overview

10.4.1 National Savings and Investments – profile

10.4.2 National Savings and Investments – main savings products

10.4.3 National Savings and Investments – main competitors

10.4.4 National Savings and Investments – board of directors

10.5 Nationwide Building Society – Company Overview

10.5.1 Nationwide Building Society – profile

10.5.2 Nationwide Building Society – main savings products

10.5.3 Nationwide Building Society – main competitors

10.5.4 Nationwide Building Society – board of directors

10.6 Santander UK Plc – Company Overview

10.6.1 Santander UK Plc – profile

10.6.2 Santander UK Plc – main savings products

10.6.3 Santander UK Plc – main competitors

10.6.4 Santander UK Plc – board of directors

10.7 The Royal Bank of Scotland Group – Company Overview

10.7.1 The Royal Bank of Scotland Group Plc – profile

10.7.2 The Royal Bank of Scotland Group Plc – main savings products

10.7.3 The Royal Bank of Scotland Group Plc – main competitors

10.7.4 The Royal Bank of Scotland Group Plc – board of directors

11 Appendix

11.1 Methodology

11.2 Contact Timetric

11.3 About Timetric

11.4 Timetric’s Services

11.5 Disclaimer

List of Figures

1 Executive Summary

2 Introduction

2.1 What is this Report About?

2.2 Definitions

2.3 Methodology

3 Market Analysis

3.1 Market Size

3.1.1 Cash ISAs

3.1.2 Cash ISA Breakdown

3.1.3 Stocks and shares ISAs

3.1.4 Sight and time deposits

3.1.5 National Savings and Investments (NS&I)

3.1.6 ISAs by region

3.1.7 ISAs by income group

3.1.8 Junior ISAs

3.1.9 ISAs by age and gender

3.2 ISA Interest Rates

3.3 Market Outlook

3.3.1 Total Number of ISAs

3.3.2 Cash ISAs

3.3.3 Stocks and Shares ISAs

3.3.4 Interest Rates

4.1 Economic Backdrop

4.1.1 Labor market conditions

4.1.2 Disposable income

4.1.3 Inflation

4.1.4 Central bank rate

4.1.5 Energy bills

4.1.6 House prices

4.2 Saving Behavior

4.2.1 Savings ratio

4.2.2 Switching providers

4.2.3 Saving motivations

4.2.4 Sentiment towards banks

5 Competitive Landscape

5.1 Market Shares

5.2 ISA Interest Rates

6 Product Innovation

7.1 Recent Changes

7.1.1 Cash ISA allowance and NISA

7.1.2 Funding for Lending scheme

7.1.3 Financial Services Compensation Scheme

7.1.4 Capital Requirements Directive IV (CRD IV)

7.1.5 Financial Services (Banking Reform) Act 2013

7.2 Upcoming Regulations

7.2.1 Basel III

9 News

10 UK Retail Banks

10.1 Barclays Plc – Company Overview

10.1.1 Barclays Plc – profile

10.1.2 Barclays Plc – main savings products

10.1.3 Barclays Plc – main competitors

10.1.4 Barclays Plc – board of directors

10.2 HSBC Bank Plc – Company Overview

10.2.1 HSBC Bank Plc – profile

10.2.2 HSBC Bank Plc – main savings products

10.2.3 HSBC Bank Plc – main competitors

10.2.4 HSBC Bank Plc – board of directors

10.3 Lloyds Banking Group Plc – Company Overview

10.3.1 Lloyds Banking Group Plc – profile

10.3.2 Lloyds Banking Group Plc – main savings products

10.3.3 Lloyds Banking Group Plc – main competitors

10.3.4 Lloyds Banking Group Plc – board of directors

10.4 National Savings and Investments – Company Overview

10.4.1 National Savings and Investments – profile

10.4.2 National Savings and Investments – main savings products

10.4.3 National Savings and Investments – main competitors

10.4.4 National Savings and Investments – board of directors

10.5 Nationwide Building Society – Company Overview

10.5.1 Nationwide Building Society – profile

10.5.2 Nationwide Building Society – main savings products

10.5.3 Nationwide Building Society – main competitors

10.5.4 Nationwide Building Society – board of directors

10.6 Santander UK Plc – Company Overview

10.6.1 Santander UK Plc – profile

10.6.2 Santander UK Plc – main savings products

10.6.3 Santander UK Plc – main competitors

10.6.4 Santander UK Plc – board of directors

10.7 The Royal Bank of Scotland Group – Company Overview

10.7.1 The Royal Bank of Scotland Group Plc – profile

10.7.2 The Royal Bank of Scotland Group Plc – main savings products

10.7.3 The Royal Bank of Scotland Group Plc – main competitors

10.7.4 The Royal Bank of Scotland Group Plc – board of directors

11 Appendix

11.1 Methodology

11.2 Contact Timetric

11.3 About Timetric

11.4 Timetric’s Services

11.5 Disclaimer

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