The last 12 months have seen a significant increase in the number of savers opening a cash ISA, analysis by Hargreaves Lansdown (HL) has shown.
An estimated 100,000 savers have opened a cash ISA with HL in the last year, compared with 43,000 in the previous 12 months.
HL’s findings come as the Government continues to consider reducing the cash ISA limit, with Rachel Reeves rumoured to be announcing some ISA reforms in her Mansion House speech on 15 July.
More than a third of HL clients (36%) who initially open a cash ISA with HL start investing with HL within a year. The analysis also revealed that around half (49.5%) of HL clients put more than £15,000 into their cash ISA, while two in five (42%) pay in between £19,000 and £20,000.
HL highlighted that any potential reductions to the ISA limit, which is currently set at £20,000, would have an impact on the total pool.
Potential reductions of the limit to £15,000 would have an impact on that total pool.
Most savers are opting for easy access ISAs, with 60% of HL clients opting for easy access and 40% for fixed rates.
Head of active savings at HL, Mark Hicks, said that cash ISAs have had a “huge year”.
“The ISA season has extended across a significant portion of the year, not least because cash ISA rates are generally higher than the easy access equivalent savings accounts,” Hicks commented.
“Our data shows that cash ISAs are vital step towards investing, because more than a third of clients who initially open one go on to invest with HL within a year. Over some periods, this rises to 40%. This trend is far more striking than the move from regular savings accounts to investing – where it’s between a fifth and a quarter.”
Hicks added: “If the cash ISA allowance was cut, we wouldn’t expect this to force HL clients to invest the rest overnight. Instead, they’d be far more likely to move the rest into savings accounts and pay more tax.
“As the rates on offer for cash ISAs still outperform savings accounts, particularly so for higher rate taxpayers, we expect to continue to see increased popularity for cash ISAs over the next 12 months.”
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