Lifetime ISAs
The Lifetime ISA was announced at Budget 2016 and became available in April 2017. People who are under the age of 40 can open a Lifetime ISA and save up to £4,000 per year. The government will then top this amount up by 25%. This means that for people who save the maximum each year, the government will top up the account with £1,000.
Lifetime ISA funds can be put toward a deposit for a home that is worth a maximum of £450,000 in all areas of the UK, or taken at age 60 to be used as retirement income.
How ISAs performed in tax year 2018-19
According to the HMRC statistics published in June 2020, the number of investors subscribing to stocks and shares ISAs in the 2018-19 tax year fell by 450,000 from 2017-18, while those subscribing to cash ISAs increased by 1.4 million. Overall, adult ISA subscriptions rose to 11.2 million in 2018-19 from 10.1 million in 2017-18.
Around £67.5 billion was subscribed to adult ISAs in 2018-19, an increase of £2.3 billion on 2017-18. This was driven by the rise in cash ISA subscriptions, which rose by £7.3 billion. The amount subscribed to stocks and shares ISAs fell by £5.2 billion compared with 2017-18.
The average subscription in a stocks and shares ISA in 2018-19 was £9,331 and £5,187 for cash ISAs – slightly down on 2017-18.
Increase in junior ISAs
Around 954,000 total Junior ISA accounts were subscribed to in 2018-19, the scheme’s eighth full financial year since launch, up from 907,000 in 2017-18. Some £974 million was subscribed to in these accounts in 2018-19, around 57% of which was in cash.
The average amount subscribed to a junior stocks and shares ISA was £1,465 and £830 in a junior cash ISA.
Gender breakdown
There were 11.439 million ISA subscriptions by women by the end of the 2017-18 tax year compared with 10.594 million for men. However, men have higher average balances than women (£27,643 versus £24,831).
Stocks and shares ISA subscriptions were greater among men (1.3 million) than women (1.025 million), but the reverse is true when it comes to cash ISA subscriptions (2.889 million for men versus 3.585 million for women).
Vince Smith-Hughes, director of specialist business support at Prudential UK said: “The change in ISA subscriptions, for both cash and stocks and shares ISAs, may be partially attributed to the volatile markets we experienced in 2018, with investment returns from some markets producing negative returns. This could have made potential stocks and shares investors more nervous.
“It’s interesting to see that higher income groups show a stronger preference for stocks and shares ISAs over cash ISAs, whilst the opposite applies for lower income groups.
“One tried and trusted method of dealing with volatile markets is to invest on a regular basis and therefore ‘average out’ the price an investor buys in at. By making a single investment, either at the start or the end of the tax year, they might or might not be lucky with their timing.”
