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£75bn into adult ISAs in 2019/20

Savers paid £75bn into 13m new adult ISAs in the 2019/20 tax year, a rise of £7.1bn year-on-year, according to the latest ISA statistics from HMRC.

At the end of the 2019/20 tax year, UK savers held a total of £620bn in ISAs, a rise of 6{d4ee6c39d3f4947aa08b0ac18d9d8b61a7295d521c90ad86a8a514771ea81e11} year-on-year and a new record.

More women invested in ISAs than men in with 10.5m women investing using ISAs compared to 9.7m men, according to the latest gender split data also released today (2018/19 tax year). However, despite this, the gender ISA gap was £2,991 in 2018/19, up from £2,812 a year earlier, and almost doubling in a decade (from £1,550 in 2008/9).

The number of cash ISAS opened rose 1.2m year-on-year whilst stocks and shares ISAs rose 300,000.

Payments into cash ISAs rose £4.8bn (to £48.7bn) whereas payments into stocks and shares ISAs rose £1.6bn (to £24.2bn) year-on-year.

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Tom Selby, senior analyst at AJ Bell, said whilst those who held a significant proportion of their ISA in cash might have felt like they had dodged a bullet in March and April last year, when markets tanked as the UK entered its first lockdown. However, with values recovering substantially, those invested in cash with have missed out.

He also warned about the risk inflation could pose to Cash ISA savers. He said: “There is of course nothing wrong with investing in Cash ISAs, particularly if your time horizons are relatively short. But the returns on offer remain paltry, with the best easy access Cash ISA paying just 0.46{d4ee6c39d3f4947aa08b0ac18d9d8b61a7295d521c90ad86a8a514771ea81e11}.

“Those willing to lock their money away for 5 years could get a Cash ISA return of 1.21{d4ee6c39d3f4947aa08b0ac18d9d8b61a7295d521c90ad86a8a514771ea81e11} – a significant improvement but hardly exceptional given many expect inflation to return to the economy over the next 12 months. By contract, the FTSE 100 is forecast to yield 3.8{d4ee6c39d3f4947aa08b0ac18d9d8b61a7295d521c90ad86a8a514771ea81e11} this year.

“It is this inflation which poses one of the biggest risks to cash investors in the coming years. Anyone with a longer-term time horizon who is concerned about the impact of rising prices on their funds and happy to take some investment risk should consider putting at least some of their portfolio in stocks and shares.”

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said that whilst considerably more was saved into cash ISAs, the balance has started to shift with stocks and shares ISAs making up a larger percentage of new ISAs than we have seen in previous years.

She said: “Although cash continues to dominate, the rush into stocks and shares ISAs at the end of the year can be seen in the figures. For 14 of the past 15 years, cash ISAs have made up a larger proportion of new ISAs than we saw in 2019/20.”

Junior ISAs had a record year, passing the milestone of over a million new JISAs opened in the year for the first time since they were launched in 2011.

Savers paid £971m into JISAs, with around 61{d4ee6c39d3f4947aa08b0ac18d9d8b61a7295d521c90ad86a8a514771ea81e11} being in cash.

Heather Owen, financial expert at Quilter, said it is concerning that “cash is king” when it comes to JISAs.

She said: “While cash JISAs do generally provide returns above the rate of inflation, meaning account holders will not be losing money in real terms, they will not benefit from potentially 18-years of investment returns. If parents contribute the full £9,000 each year for the full 18-years, then their child has a chance of starting adult life with pot worth a quarter of a million pounds. Not exactly loose change.”

Ms Owen said she expects JISAs to soar in popularity in the current tax year with the subscription limit being doubled last year.

She said: “We should continue to see Junior ISAs soar in popularity as they become a crucial part of family finances by allowing wealth to trickle down the generations.”

The number of Lifetime ISAs doubled from 223,000 to 545,000. The amount paid in also doubled to £1.26bn.

Ms Coles s expects the number of Lifetime ISAs to jump again for the current tax year. She said: “2019/20 was a huge year for Lifetime ISAs, which more than doubled from a year earlier. Whenever a new ISA is launched we see the numbers climb as people get familiar with them, and in its second year, the LISA has boomed. Next year we expect these figures to have jumped again, as people who made lockdown savings ploughed their money into LISAs to help meet their property and retirement goals.”

Almost a fifth (18{d4ee6c39d3f4947aa08b0ac18d9d8b61a7295d521c90ad86a8a514771ea81e11}) of savers maxed out their ISA allowance by the end of the tax year.


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