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 [1]
Or maybe money is like sex because these days everyone is talking about it [2], 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 [3], 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 [4] 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 [5], 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 [6], 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 [7] 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 [8] 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 [9] calculations on non-ISA protected shareholdings, in order to defuse future tax liabilities [10]. 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 [11], 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.
- Seriously, your lungs do not know to breath without a dash of CO2. [↩ [16]]