Two-thirds of UK renters have no savings or investments

Following July’s budget changes that allow consumers to now save up to £15,000 in tax-free ISAs, the spotlight has recently been focussed on the benefits of saving. However, new research from Mintel reveals that almost half (45%) of Brits have nothing put by for a rainy day, rising to two thirds (66%) of renters.

Further to this, it is single consumers who are more inclined to splurge than save, as three fifths (60%) of single Brits have no savings or investments compared to 39% of their married counterparts. There are also large geographical differences, with three-quarters (75%) of Brits living in the South holding savings or investments compared to less than half (47%) living in the Midlands and East Anglia.

Whilst there are large discrepancies between the consumers who are choosing to save and invest, Mintel forecasts the ISA market to grow by 31% in the next five years. With the current adult ISA subscription market carrying a value of £57 billion, this is forecast to surpass £75 billion in 2019. Despite this, the increase expected in the volume of cash ISAs is predicted to be small, rising from 10.5 million in 2014, to 11.1 million in 2019. Mintel expects the number of stocks and shares ISAs to see comparatively larger growth, rising from 3 million in 2014, to 7.2 million in 2019.

Alexander Hiscox, Senior Finance Analyst at Mintel, said:

“There are a number of factors which will continue to hold back growth in the ISA market. Increasing consumer confidence will mean that consumers feel more inclined to spend, with many feeling that they no longer need to save. Future growth in the market will come from helping consumers to develop better saving habits. ISA providers would benefit from both educating consumers as to the value of long-term investing and also providing tools to help consumers do this effectively.”

Furthermore, Mintel’s research shows that just 12% of ISA owners expect to invest the full £15,000 in the next tax year, showing that the majority of ISA holders will not be able to take advantage of the increased allowance. However, 10% of consumers say that they are looking to save more than they have been following the increase to the ISA allowance, suggesting that the changes should help boost the market over the next few years.

Indeed, despite the recent changes, today in the UK just a third (32%) of UK consumers have any type of ISA*, with a quarter (24%) of Brits holding an instant access cash ISA, one in 10 (11%) a stocks and shares ISA and 9% a fixed term or notice cash ISA. In comparison, two-fifths (39%) of Brits put money aside in a savings account, with 38% using an instant access savings account and 7% a fixed term of notice savings account.

“There are a number of reasons for the under-use of cash ISAs – partly, it’s simply because of convenience. The rates available to savers means that for those with relatively small amounts of savings, the amount of tax payable on a savings account is negligible. On a balance of £3,000 and with an interest rate of 1.5%, the difference will be £9 a year. For that amount of money, people will tend to just opt for the simplest product. And for most people, that’ll be a straightforward savings account.” Alex continues.

In addition, Mintel’s research shows that consumers at a later stage of life are more likely to hold an ISA or savings account, with 70% of consumers aged 65 and over having savings or investments compared to just 33% of those aged 18-24. There is also a marked difference in the ownership of ISAs, with almost half (48%) of Brits aged 45-54 holding one, compared to just over one in five (22%) aged 18-24.

“For ISA providers, the challenge is to educate younger consumers about the importance of saving before they start a family, preparing them for later life. After all, today’s young penniless students will be tomorrow’s high earners.” continues Alex.

Finally, Mintel’s research has found that the top reason for ISA owners to use the money is to help fund their retirement, with three in 10 (29%) claiming this is how they will use their savings. A quarter (23%) say they will put the money towards emergencies or unexpected events and one in five (20%) to grow their wealth.

* ‘Any type of ISA’ includes ‘instant access cash ISA’, ‘stocks and shares/equity ISA’ and ‘fixed term/notice cash ISA’

Mintel’s ISAs UK 2014 report is available to purchase priced £1750.

Press review copies of the report and interviews with Senior Finance Analyst Alexander Hiscox, are available on request from the press office.

Have you seen our UK 2015 Trend Predictions? Download for free here.