Tel: 01283 701569

Experienced Independent Financial Advisers

Millennials look to build long-term wealth

16 Oct 2020

Giving up on cash altogether, disillusioned by today’s dismal savings rates

The number of people in their 20s and early 30s choosing to invest in a Stocks & Shares Individual Savings Account (ISA) prior to the coronavirus pandemic outbreak increased according to the latest HM Revenue & Customs annual ISA data[1].

Research shows that Generation Z and Millennials are now more likely to invest than Baby Boomers. Many have given up on cash altogether, disillusioned by today’s dismal savings rates. An ISA is a tax-efficient investment vehicle in which you can hold a range of investments, including equities.

Different types of investment options
The different types of investment that can be held in a Stocks & Shares ISA include: unit trusts, investment trusts, exchange-traded funds, individual stocks and shares, corporate and government bonds, and OEICs (Open-Ended Investment Companies).

The data shows that under-25s are now the fastest-growing demographic in terms of Stocks & Shares ISA subscriptions, followed by those aged between 25 and 34. Subscriptions across both age brackets jumped 92.3% from 131,000 to 252,000 between the 2016/17 and 2017/18 tax years.

More subscribe to a Stocks & Shares ISA
The number of under-25s with both a Stocks & Shares ISA and a Cash ISA also increased by 138% from 13,000 to 31,000 over the same period. The number of people aged between 25 and 34 subscribing to a Stocks & Shares ISA leapt 71% from 109,000 to 186,000 between the 2016/17 and 2017/18 tax years.
By comparison, analysis found that the number of people aged between 35 and 44, as well as those aged 65 and over, who subscribed to a Stocks & Shares ISA increased by just 4% and 5% respectively over the same period.

Less of an appetite for investment risk
The analysis also indicated that the figures for people aged between 45 and 54, as well as those aged between 55 and 64, subscribing to a Stocks & Shares ISA actually fell over the course of the year, indicating that these age groups had less of an appetite for investment risk.

The introduction of the Lifetime ISA, which gives subscribers a 25% government top-up on their savings (up to a maximum of £1,000 a year), is at least partly responsible for the uplift in the number of under-35s trying their hand at investing. Those aged between 18 to 39 can open a Lifetime ISA and save up to £4,000 annually, tax-efficiently, up to including the day before their 50th birthday.

You can’t carry any unused amount over
Since ISAs were launched 21 years ago, savers have accrued billions of pounds in these tax-efficient wrappers. The 2020/21 Stocks & Shares ISA allowance is £20,000 for individuals aged 18 and over. All savings held inside the ISA’s tax-efficient wrapper are exempt from Capital Gains Tax, dividend tax and Income Tax.
Bear in mind that the amount you can contribute into an ISA is limited by the type of ISA you have. The tax year runs from 6 April one year to 5 April the next, and you can’t carry any unused amount over to a new tax year – so it’s either use it or lose it. The ISA allowance simply resets back to the annual allowance again on 6 April.

Source data:
[1] https://www.gov.uk/government/statistics/individual-savings-account-statistics

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

Footnote: Our belief is that all finacial advice should be tailored to your particular needs and situation. The content of the articles featured in here are for your general information and use only; they are not intended to address your particular requirements or constitute a full and authoritative statement of the law. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. Please get in touch to meet with us for a full consultation.

Get in touch for more details

Please fill the form below to contact us

    Your Name (required)

    Company Name

    Your Email (required)

    Areas of concern

    Individual servicesCorporate servicesMiscellaneous

    Subject

    Your Message

    We take your Privacy Seriously. Personal information submitted to us with this form will be treated in accordance with the Data Protection Act 2018 and General Data Protection Regulations ‘GDPR’. By submitting this enquiry form you expressly consent to be contacted without prior notice or arrangement by using the contact details you have provided on the form. For further information on how we treat your personal information, please view our Privacy Policy

    I have read and agree to the privacy policy. Please retain my details to contact me.Please do not add me to the mailing list.