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ISAs gain popularity as fixed-rate balances boom

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The amount of cash held in adult ISA accounts rose by nearly a fifth last year as savers took advantage of rising fixed-rate product pricing to shield their money from tax, Paragon Bank analysis of market data shows.

Overall adult ISA balances grew by 17%, or £45 billion, to £309.3 billion by the end of 2023, according to analysis of the latest available CACI data, outpacing the growth of non-ISA balances. Non-ISA adult cash accounts grew over the year from £764 billion to £801.3 billion, an increase of £37.4 billion, or 5%.

The adoption of fixed-rate ISAs drove the increase in adult cash ISA balances, with the amount of cash held in fixed-rate variants overtaking instant access ISA accounts for the first time in available CACI data (from January 2018), in the final three months of the year.

Overall, fixed-rate ISA balances increased by 76%, from £89.7 billion in December 2022 to £157.9 billion at the end of the year.

Conversely, the level of cash held in adult instant access ISAs fell from £167.8 billion to £145.2 billion over the year, a reduction of 13%.

The growth of adult cash ISA balances outpaced non-ISA variants during the year as both a percentage and overall balance. Non-ISA accounts grew over the year from £764 billion to £801.3 billion, an increase of £37.4 billion, or 5%.

Last year also marked one of the busiest ISA seasons on record, with £10.7 billion and £13.4 billion placed in new adult cash ISA accounts in March and April respectively. March ISA new business levels were 256% higher in 2023 than the previous year, with April 154% higher.

Of the £73.5 billion placed in new adult fixed-rate cash ISA accounts in 2023, 97% of deposited in accounts with terms of two years or less; £48 billion was deposited in accounts with a fixed-rate period of greater than six months and up to a year, and £23.3 billion placed in accounts with a term of greater than 12 months and up to two years.

Derek Sprawling, Paragon Bank Savings Director, said: “Last year marked the return of the ISA season, with much of that money heading into fixed-rate accounts as savers took advantage of increasing interest rates. As savings rates increased across the market, more people became exposed to tax as their returns breached their Personal Savings Allowance.

“One year fixed-rate products were by far the most popular option for savers and the good news is that their product is likely to be maturing into a higher rate environment, meaning they should be able to achieve better returns if they move to a new ISA product.”

For further information contact:

Michael Clarke
Head of Media Relations
Paragon Bank

Notes to editors:

CACI compiles the savings deposits of 35 leading providers of cash savings.

Paragon Bank PLC is a subsidiary of the Paragon Banking Group PLC which is a FTSE 250 company based in Solihull in the West Midlands. Established in 1985, Paragon Banking Group PLC has over £14 billion of assets under management, helping more than 340,000 customers to achieve their ambitions.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551.