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The average savings in an ISA, by salary

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I read recently that money is the new sex. But given that sex and money have been mixing it for thousands of years – and often getting together to, um, bury the hatchet – I think that’s a pretty bold claim.

What next? Food is the new water? Oxygen is the new carbon dioxide?1

Or maybe money is like sex because these days everyone is talking about it, but nobody is getting any.

Journalistic tropes aside, one thing money and sex have in common is that we’re fascinated by other people’s mattresses – what happens on top of them, and what they’ve got stashed underneath.

Which is all a long-winded way of saying I’ve come across some interesting statistics about the average savings in an ISA, broken down by salary.

And you know you can’t resist a peek!

MPs in ISA savings revelation

This tangle of juicy ISA statistics comes to us courtesy of Hansard, the official record of UK Parliamentary debates.

Written questions were asked about the average savings in an ISA by salary – I’d guess to make political hay when it was ‘revealed’ that those on lower earnings don’t usually have as much saved as those on higher salaries.

But one person’s axe to grind is another person’s prurient look behind the curtain of people’s ISA savings habits.

The first piece of data shows how many thousands of people in different income brackets (left hand column) have ISA savings pots in six bands (to the right), running from £15,000 to £500,000.

Note that these figures – apparently the latest the Exchequer has to hand – are from 2008 / 2009:

Income band £15K to £20K £20K to £30K £30K to £50K £50K to £100K £100K to £200K £200K to £500K
£0 to
£5K
217 127 137 41 8 1
£5K to £10K 336 278 289 115 16 2
£10K to £20K 715 516 555 204 34 4
£20K to £30K 364 280 301 126 23 2
£30K to £50K 312 260 267 126 27 5
£50K to £100K 163 142 177 70 20 3
£100+ or more 66 72 92 56 19 4

Note: Bands rounded up to nearest the £1,000. Source: Hansard

For example, the most populous intersection shows that 715,000 people earning £10,000 to £20,000 have savings of £15,000 to £20,000.

Unfortunately, no details were asked or given about those with average ISA savings amounts below £15,000.

What about those with more than £500,000 tucked into an ISA?

This was asked, naturally enough! The original data has two further columns – one band for £500,000 to £1 million and then another for savings over £1 million. But none contain any data.

According to the Exchequer:

Information in respect of ISA market values above £500,000 is not separately available because of the limitations of the statistical sample from which the analysis has been drawn. However, fewer than 500 individuals are estimated to be represented in each of the separate ISA market value categories taking all the income ranges together.

I think this is saying the Exchequer estimates that fewer than 1,000 people have ISA savings of more than £500,000 (so fewer than 500 in the £500,000 to £1 million band, and the same for £1 million and over).

However an alternative interpretation I’ve read is that it means there are fewer than 500 for each of the seven income bands on the left.

I don’t think this is right, but it is feasible. Someone might earn less than £5,000 but have a rich spouse, and so eventually have a big ISA! Or they might have invested well and decided to live off their ISA savings, and no longer be earning. Or perhaps they have trust funds or an inheritance.

Some combination of those will also explain the 3,000-odd people who are earning less than £5,000 but have more than £200,000 in ISA savings.

How to make a million in an ISA

ISAs were introduced in April 1999, so to achieve a portfolio of £500,000 or more in ISA investments by 2009 would have been quite a feat.

However before ISAs there were similar savings accounts called PEPs, launched in 1986. In 2008, old PEPs automatically became stocks and shares ISAs, and I presume these stats refer to ISA savings that were originally wrapped up in PEPs, as well as pure-bred ISAs.

According to an FT article about ISA millionaires, as of 2012:

An investor who made full use of the maximum Pep or Isa allowance each year for the past 25 years would have invested £192,480 in total, which would have grown to almost £500,000 based on an average annual return of 7 per cent. With average returns of 11.7 per cent, they could have broken the £1m mark.

A nearly 12% annual return looks fanciful to today’s battle-weary investors’ eyes. But it will be interesting to see the same statistics in 2020, say, if we get the good spell in the markets that mean reversion indicates could be due after the lousy past decade.

I’d expect to see a lot more ISA millionaires by then.

Individual Savings Account market values: 2008-09

The second table reveals that most people aren’t very serious about tax-free savings, regardless of what they earn:

Income band Median ISA
market value
Average ISA
market value
£0 to £5K £3,700 £9,000
£5K to £10K £5,800 £11,900
£10K to £20K £6,400 £12,200
£20K to £30K £5,100 £11,700
£30K to £50K £6,700 £13,300
£50K to £100K £10,100 £17,500
£100K or more £13,800 £24,500

Note: Salary band rounded to nearest £1,000. Source: Hansard

To me these numbers are dispiriting. Not just because even this preselected group of super-savers has managed to save so little (people without ISAs aren’t even counted here, remember) but also because ISAs are perhaps the best and most flexible tax break going, and savers aren’t fully exploiting them.

A six-figure salary and yet a mere median £13,800 tucked away in an ISA beyond the taxman’s grasp? Easy come easy go I guess.

There’s no distinction drawn here between cash and stocks and shares ISAs. I suspect the comparatively few hardy souls who dare to open a shares ISA are skewing the median ISA savings figure upwards to produce the average figure on the right. (According to research from Halifax bank, the average amount in its customer’s cash ISAs is up 23% this year to £8,949).

The dip in ISA savings for those earning £20-30K compared to the bracket below is interesting. Anyone got an explanation? Please share it in the comments.

Are you keeping up with the ISA savvy Jones?

So, how was it for you, darling? Did the earth move when you saw your own ISA savings compared to the average? Or was it an anticlimax?

Personally I’m just even more frustrated that I didn’t start fully using my annual ISA allowance until around 2003. I had plenty of cash saved by then, but I kept it in ordinary savings accounts.

What an idiot I was, given that unused limits cannot be carried forward to future years. Only this week I’ve had to do more tedious capital gains tax calculations on non-ISA protected shareholdings, in order to defuse future tax liabilities. I’m jealous of those with 25 years of PEP and ISA allocations to play with!

As I’ve said before, it’s worth using stocks and shares ISAs just to save paperwork, let alone the tax advantages. And who knows, maybe one day you could be swelling the ranks of the ISA half-a-millionaires-or-more?

That’s what I’m aiming for – the less-than-a-thousand club!

It sure beats the Mile High Club. The food is better, for a start.

  1. Seriously, your lungs do not know to breath without a dash of CO2. []
{ 11 comments… add one }
  • 1 ermine March 30, 2012, 9:49 am

    I think you’re being hard on Brits. For a start, the stock market scares the bejeesus out of many people, even very high earners. You are anomalous in this respect. Most ISA savings are cash ISAs – they outnumber S&S ISAs by 4:1 (can’t find the total holdings). Then ISAs are not the only tax protected accounts – National Savings ILSCs perform a similar function to cash ISAs at times.

    Nowever, I agree the total amounts are paltry. I have lifted my S&S ISA just off the end of your last table and I don’t earn anywhere near six figures. And I have had a S&S ISA worth more than mine is now before liquidating it in 2007 before the credit crunch, by luck rather than judgement.

    You’ve put the glass-half-full reasoning for ISA millionares by 2020. Repeated rounds of QE money printing and the resulting inflation will also help that outcome no end 😉

    will also explain the 3,000-odd people who are earning less than £5,000 but have more than £200,000 in ISA savings.

    Given that a privately owned SME’s accountant would pretty much forbid the owner to take an income from it rather than dividends there are other explanations for this conundrum…

  • 2 The Investor March 30, 2012, 9:56 am

    @ermine — I’m being dense perhaps but I don’t understand why you’re bringing SME (small businesses, for the initiated) into it?

    But on that note it’s perfectly feasible to draw a modest PAYE income from a limited company, without incurring tax. In fact accountants typically advise paying a salary up to the annual tax free personal allowance, as this way you get your full NI credit for the year.

    I’m sure you’re correct about most people fearing the stock market but that doesn’t make them right to! 🙂

    Thanks as ever for your comments.

  • 3 Alex March 30, 2012, 11:41 am

    If you play around with the data and Excel (ok, I’m a geek) it’s interesting that there is a distinct similarity between all income groups and the % of accounts in each bucket. Does anyone have any views on the psychology having a rainy day fund and once it’s reached a certain size then spending money on other things? That may explain why there’s a drop off after 20k.

    What I find interesting is the jump as a % of accounts in the 30-50k bucket. Are people saving up for a house deposit and then dropping back into the <15k set?

  • 4 ermine March 30, 2012, 11:54 am

    > In fact accountants typically advise paying a salary up to the annual tax free personal allowance

    You got it in one 🙂 I would imagine that SME owners who ran a successful business would feature largely in stats of people who accumulate savings and therefore had ISAs. I was therefore not so surprised to see these low-income savers.

    The fear of the stock market is widespread. I hear people all the time who are going BTL for their savings because you can’t trust the stock market, it might go down. And we have had a particularly dismal 10 years compared to the eighties and the 90s, so recency bias will amplify this. BTL, of course, is a sure fire investment unexposed to government meddling and wonderfully diversified both by sector and geographic spread, as we all know.

  • 5 Guy March 30, 2012, 12:38 pm

    Just a guess but could the dip be caused by home ownership – below 20k you might not be able to buy, 20-30k you could afford it but not have much left over to put away? Ermine’s suggestion makes sense, although I’d expect you’d need a fair few people doing it (or large ISAs) to affect the average like that – enjoyed the comments on BTL as an investment too, by the way!

    Just re-read Alex’ comment – home deposit is a good explanation too; probably a combination of all these factors, to some degree.

    Best,

    Guy

  • 6 Alex March 30, 2012, 12:47 pm

    One other question I have from the numbers given is the age break down as well. My guess would be that the people on a 5k income with 200k+ ISA are probably in late middle age, and have switched from taking income to paying into pensions. If they do this through salary sacrifice / payroll then their reported income would drop in line with this.

    There’s a good section in the National Statistics Office website on wealth in the UK here : http://www.ons.gov.uk/ons/rel/was/wealth-in-great-britain/main-results-from-the-wealth-and-assets-survey-2006-2008/index.html

  • 7 Rob March 30, 2012, 3:06 pm

    It’s always advisable to make full use of the ISA and SIPP allowances. Right now cash ISAs might not be earning much interest, but it will pick up again and the difference could be appreciable considering the effort required.

  • 8 Deb March 30, 2012, 5:10 pm

    Interesting article. I’m willing to hazard a guess on the lower average ISA savings for those earning 20-30k. I reckon a good proportion of your lower salary earners (with an ISA) are part-timers with a fully employed partner.

    I think more of the sole earners (with or without a family) will kick in at the 20-30k mark and may find it harder to put money aside.

  • 9 MCF March 31, 2012, 9:59 am

    Very interesting….what I would really like to see is that data split down by age bracket as well!

  • 10 Lee April 5, 2012, 3:29 pm

    Know the feeling, Monevator. Despite blogging about the virtues of ISA’s for the last 3 years, this financial year is the first time I’ve actually managed to fill one to capacity. Not through a lack of available cash, but just not totally trusting “something different”.

    Now that’s irony, coming from a Personal Finance blogger.

  • 11 The Investor April 5, 2012, 4:09 pm

    @Lee — Unfortunately I had the money, I just didn’t open the ISAs until about a decade ago. Not even cash ISAs! Madness.

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