Number of ISAs sold jumps 79% in 2020

The number of Individual Savings Account (ISA) products sold in 2020 jumped 79% to a five-year-high.

This is what an analysis of data from the Financial Conduct Authority by Salisbury House Wealth reveals.

In 2020, 388,363 ISA products were sold. It compares to 216,933 in 2019.

UK households have saved £184bn in bank accounts since March 2020.

Many people were able to save more as a result of the closure of hospitality venues and travel restrictions.

Yet, Salisbury House Wealth says that savers should be wary of putting too much of their money into cash ISAs. This is due to record low interest rates.

The Bank of England base rate of 0.1% and lack of competition between banks means that even the best ISAs offer only 0.6% interest.

Therefore, savers will struggle to get a good deal among cash ISA providers.

They will also see the value of their cash eroded over time due to inflation.

Salisbury House Wealth says once people have paid off expensive debt, they should invest into longer-term products.

This is to maximise savings in the future.

Salisbury House Wealth managing director Tim Holmes said: “The pandemic has helped many people build up a healthy amount of savings but people need to be smart about what they do with this.

“UK savers have traditionally overinvested in cash ISAs, which has resulted in the value of their savings decreasing substantially.”

“People should consider investing into a Stocks & Shares ISA, where they will retain the tax benefits of an ISA, with better returns over time.

“As always when investing, it’s important to stagger investments in equities and diversify your portfolio to minimise risk.”

ISAs enable people to invest or save up to £20,000 per year without incurring tax on interest or share dividends.

Any gains made on investments are also exempt from capital gains tax if the person decides to sell the assets.

Earlier this year, Freetrade reported a significant rise in ISA subscriptions with a 244% surge year-on-year.