Mini cash ISAs show highest growth

14 September 2007
Although Datamonitor has pointed out some uncertainty over the future of Individual Savings Accounts (ISAs), its new report on savings shows that ISA sales reached record levels in 2006.

The company revealed that new ISA sales totalled £33.3 billion in 2006, with a record 13,788 ISAs taken out. The most popular type was the mini cash ISA, for which annual sales value grew 6.5 per cent compared with 2002.

Annual sales of maxi ISAs have been less prolific, with lower sales values and lower numbers of subscriptions in 2006 than recorded in 2002.

Spokesperson for F&C Investments Jason Hollands said: "A tax-free, mini-cash ISA is certainly more attractive than a standard savings account and returns have improved over several months thanks to interest rate rises.”

Despite this, it is difficult to evaluate whether these results show a genuine increase in savings, as Mr Hollands points out.

“It is doubtful whether this apparent boom in cash ISAs is a useful indicator as to whether they have encouraged the savings bug…since the UK household savings ratio has tested long-term lows over the same period.”

It is possible that the additional money being paid into ISAs would have been paid into traditional savings accounts had ISAs not been introduced.

“A better measure of the appetite for long-term savings will be when investors start moving from cash back into the markets,” said Mr Hollands.

Find out more about mini cash ISAs and ISA interest rates