Different types of ISA also remain a mystery to majority of Brits
The majority (62 percent) of the British public don’t know when this year’s ISA deadline is, despite it being just one week away (5th April).
The 2,000-strong survey, commissioned by peer to peer property lending platform The House Crowd, also shows a lack of ISA awareness throughout the rest of the population, with a whopping 69 percent claiming not to know the difference between cash ISAs, stocks and shares ISAs, and IFISAs. An even larger number (87 percent) said they don’t know what an Innovative Finance ISA (IFISA) is.
One in four of the UK’s young adults (aged 18 to 24) don’t know what an ISA is to begin with, let alone the differences between ISA options.
Commenting on the findings, Frazer Fearnhead, founder and CEO of The House Crowd, said: “It seems the government needs to work on increasing general awareness of the ISA product set, especially with the younger generation.
“Two decades on, the Cash ISA remains a popular option, but average interest rates can easily be eroded by inflation. Innovative Finance ISAs offer returns that are, on average, much higher and much more consistent.
“Our research shows only two percent of the British public will be saving £20,000 or more in the next 12 months, which means it’s important they understand their options. Stocks and Shares ISAs increased in popularity in 2017/18, while the amount of money invested in cash ISAs fell.
“However, a lot of people are reluctant to invest in stocks and shares due to volatility. The FTSE, for example, has dropped 9.6 percent since April 2018*. That’s why the IFISA is appealing – it’s based on lending, which people understand. What people don’t realise is that even though their investment isn’t protected by the FSCS, it can be secured against a tangible asset like property.
“The government decided to introduce the IFISA, so we feel it has a responsibility to educate potential investors on what it is.”
The amount invested in the Innovative Finance ISA increased from £36 million (spread across 5,000 accounts) in 2016/17, to £290 million (spread across 31,000 accounts) in 2017/18. This was versus approximately £39.8 billion invested in 7.8 million Cash ISA accounts and approximately £28.7 billion invested in 2.8 million Stocks and Shares ISA accounts in 2017/18**.
The research can be accessed in full on The House Crowd’s website.