The government’s proposed British ISA could add £59bn to the UK savings market, according to easyMoney analysis.
In the recent Spring Budget, Chancellor Jeremy Hunt unveiled plans for a new British ISA as part of its shake-up of the ISA market. The new wrapper would give UK savers an additional tax-free ISA allowance of £5,000 in addition to the existing £20,000 allowance, with which they can invest in UK-focused assets.
easyMoney, a peer-to-peer property lending platform, analysed official data on ISA savings to see how much additional investment capital could potentially be created by the new British ISA.
Overall investment into ISAs declined last year, its research showed.
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The number of ISA accounts fell by 3.8 per cent in the 2021/22 tax year to 11.75 million.
Total ISA savings fell by 7.3 per cent year-on-year to £67bn, while the average investment per ISA account declined by 3.7 per cent to £5,696.
easyMoney’s research found that this was largely due to a reduction in cash ISAs.
However, non-traditional ISAs have grown over the past year. Lifetime ISAs have seen the total amount invested increase by 14.7 per cent to £1.7bn, while Innovative Finance ISAs (IFISAs) have seen investment growth of 56.5 per cent, with the total amount invested rising to £144m.
easyMoney said that this growing interest in alternative ISAs suggests that the proposed British ISA could be popular with investors.
If all current ISA investors opted to utilise the additional £5,000 allowance of the British ISA, it would add £58.8bn to the ISA landscape, easyMoney said.
Read more: Interest in IFISAs surges as new rules unveiled
Even if just a quarter of current ISA investors opted for a British ISA, it would increase overall ISA investment by £14.7bn.
“We have witnessed a staggering rise in alternative ISA investment over the past few years with IFISAsleading the charge,” said Jason Ferrando, chief executive of easyMoney.
“Investors both professional and amateur are increasingly aware that there are better returns to be gained through alternative ISAs than there are in a more traditional cash or stocks and shares ISA, and there is also an increasing urge among the public to keep traditional finance institutions such as high street banks at arm’s-length.
“The British ISA has been envisioned to boost UK savings and boost investment into UK enterprise. We eagerly anticipate news on what sort of returns the new ISA will offer, and if it’s strong, we expect there to be strong take-up from people looking to take advantage of the additional tax-free allowance.”
