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Brits bamboozled by confusing ISA market

4 Mar 2019

Lack of knowledge preventing Britons from making the most of their money.

There are 22.1 million ISA holders in the UK1 but, according to the latest research from Octopus Investments, most of us don’t understand the basics when it comes to investing in an ISA, the options available, and the rules surrounding them.

According to the poll of more than 2,000 UK adults, ISA transfers cause the most confusion, with 1 in 2 (54%) stating they didn’t understand the rules. More than a third (36%) of adults were also in the dark as to the benefits of using an ISA compared to other savings and investments products.


To what extent do you understand the following?

% of UK adults who don’t understand

Rules for transferring funds between ISA accounts


The number of separate ISA accounts an individual can open


The annual ISA allowance


How to withdraw money from an ISA


The benefits of an ISA over other savings and investment products


When asked specific questions, two thirds (67%) of people were unaware that you can transfer funds from a Cash ISA into other types of ISA, and more than half (54%) didn’t know that you can split your savings into different types of ISA each year.

Millions losing money, despite wanting growth

The most commonly cited reason for people using an ISA was to boost their savings, with half (49%) of people selecting growth as an objective. Yet a significant majority (66%) of those looking for growth were currently saving through a Cash ISA, with 2 in 5 in five (38%) people saying this was the only ISA they held.

Overall, 60% of those currently using an ISA only have a Cash ISA account.

With average interest rates for Cash ISAs at 0.92%2 and inflation at 2% or above3, this means millions of Brits are actually losing money in real terms, despite their stated goal of growing their money.

Sam Handfield-Jones, Head of Octopus Choice, commented:

“The tax-free ISA wrapper is incredibly powerful, and the go to saving investment for many Brits, but it’s clear from our research that not everyone is making the most of their ISAs. When you consider the number of different ISA products we now have, and how complicated the rules have become, it’s no surprise that many of us are left feeling a little confused.

“The reality is that confusion around our much-loved ISAs, which remains a staple of many Brits’ financial planning, is making it harder for people to achieve their financial goals. People need to be aware that with current interest rates so low, they’re almost guaranteed to lose money in real terms by using a Cash ISA.”

Innovative Finance ISAs are the least understood

Cash ISAs remain the best understood ISA in the market, with the research revealing that many people simply don’t understand the other types of ISAs available to them.

The Innovative Finance ISA (IFISA), which provides access to peer to peer investments within an ISA wrapper, was the least understood with 8 in 10 (79%) people saying they had little or no understanding of the product. When asked, more than 9 in 10 (94%) also didn’t know whether Innovative Finance ISAs invested in stocks and shares. When asked if the Innovative Finance ISA gives customers the option to invest in stocks and shares, only 7% knew this was false. One third (34%) thought it did, while 60% didn’t know.

With three new ISAs introduced in the last four years alone, there are now six mainstream ISAs available, potentially adding to consumers’ sense of confusion. The Junior ISA was introduced in 2011, yet more than two thirds (68%) of adults still said they didn’t understand it.



Least understood ISAs

% of UK adults who don’t understand

Year introduced


Innovative Finance ISA




Lifetime ISA




Junior ISA




Stocks and Shares ISA




Help to Buy ISA




Cash ISA



Sam Handfield-Jones added:

“Diversification is so important, but we know the majority of people with an ISA only have a Cash ISA. This might be because investing in stocks and shares feels too risky, but they don’t know or understand the other options out there.

“Innovative Finance ISAs offer a good middle ground between Cash and Stocks and Shares ISAs but, quite sensibly, most people don’t want to put their money into something they don’t understand. That’s why education and proper financial planning is key. We absolutely should be doing more to help people make the most of their money and empower them to make good decisions.”


Notes to editors:

1) HMRC Individual Savings Account statistics – August 2018

2) Bank of England quoted household interest rates – January 2019

3) ONS Consumer price inflation figures – January 2019

Research conducted by Opinium Research 25th January to 28th January 2019 among a nationally representative sample of 2010 adults.

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