ISA investments to hit £40bn for the first time

UK savers will have invested an estimated £40bn in ISAs (Individual Savings Accounts) by the end of the tax year, 5th April 2010, according to Clydesdale & Yorkshire Banks.

This will be the first time that ISA investments have hit the £40bn mark and will bring the total invested, over the 11 years since ISAs were launched, to £348.8bn.

In their first year, 1999/2000, 9.3 million accounts were opened, with total investments of £28.4bn.  This year Clydesdale and Yorkshire Banks anticipate that a total of 14.8 million accounts will be opened in the UK and that total investments will hit £40bn, rises of 59% and 41% respectively. By the end of this tax year, the Banks estimate, approximately 140 million ISAs will have been opened in total.

Average investment

While the number of accounts opened and amounts invested have both risen, they have not risen at the same rate.  In 1999/00 the average ISA investment was £3,063, it is estimated that this year the average investment will be approximately £2,700, a fall of 10%; this is in spite of ISA allowances now being higher than in 1999/2000.  Over the life of ISAs, the average annual investment is estimated to be just £2,498, little more than a third of the allowance.

Commenting, Steve Reid, retail director for Clydesdale Bank, said: "The trend is for an increase in total investments, but for the first five years of ISAs there was a marked decline in the average investment.  It is only since 2005/6 that we've seen more people investing more money in ISAs.  Given the tax advantages of ISAs we would hope to see this continue."

Investment Class

Since ISAs were launched UK savers have invested over £348bn in these tax-free accounts.  Of that, around a third, £118bn, has been in stocks and shares (including life assurance), but the majority, £230bn, has been in cash.

Commenting, Steve Reid, retail director for Clydesdale Bank, said: "Clearly, ISAs have been a success, with so much invested in them.  However, there is a huge gap between what could have been invested in them and what actually has.  With an average investment of less than half the allowance and only 1 in 4 adults taking advantage of ISAs' tax-free status, savers are losing millions in tax unnecessarily."