BlackRock
Updated 07 Jun 2024
Save Article

Disclaimer

This is a non-independent marketing communication commissioned by BlackRock. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

H2: From PEP to ISA

Originally introduced by Chancellor Nigel Lawson in 1986 as the Personal Equity Plan (PEP)1, its purpose was to encourage the “democratisation” of investment, by offering a tax-efficient avenue into the stock market to a broader range of savers. The original amount that savers could shelter from the tax authorities was set at £2,400 per annum,1 but the annual allowance has been increased several times since then.

The PEP was replaced in 1999 by the ISA,2 but its intention remained the same. At the outset, savers could place £7,000 each year into an ISA. The amount each adult can currently shelter from the tax authorities each year stands at £20,000 per person.3

In the meantime, the ISA has evolved, with innovations such as the Junior ISA in 2011,4 which allows adults to save up to £9,000 per annum for their children, and the introduction of the Lifetime ISA in 2017,5 as a way for people to save or invest for their future, providing an additional boost towards buying a first property or saving for retirement.

H2: How much has been invested in ISAs in the UK?

The amount we’re paying into ISAs has grown significantly over the years. In the tax year of their introduction £28.4 billion was saved across 9.3 million adult ISAs.6 By the 2021-22 tax year, this amount had grown to £66.9 billion across 11.8 million adult ISAs.7 It has clearly been a huge success, attracting more than £700 billion of investment since 1999.7 More than 22 million UK adults currently use the ISA wrapper to help build their long-term wealth,7 which is clear evidence that the tax-efficient structure has gone some way to fulfil its original objectives.

Indeed, the ISA’s role in democratising investment in the UK has also helped catalyse the significant growth we have seen from the investment trust industry over the last 25 years. According to government data, more than £28 billion of ISA money is invested in investment trusts.1 BlackRock manages nine investment trusts focused on specific market niches, all of which are suitable for consideration as a home for an individual’s ISA allowance.


Meanwhile, the ISA structure continues to be reformed. In the 2024 Spring Budget, Chancellor Jeremy Hunt introduced the concept of the UK ISA, which will represent an opportunity for investors to shelter an additional £5,000 from the tax authorities annually, as long as they invest it in the UK. We expect to receive the finer details of this policy in the coming months, but the intention is to encourage more investment into UK companies, which is similar to the aim of the original PEP back in 1986.

H2: Have ISAs made people wealthy?

The ISA has clearly been successful in encouraging more investors to access the UK stock market to help build their long-term wealth. So much so, in fact, that it is estimated that the UK now has more than 4,000 ISA millionaires.8

Within the investment trust industry, according to research from the Association of Investment Companies (AIC), the trade association which represents the investment trust sector, a total of 32 investment trusts could have created millionaires of their shareholders.9

Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

This is an excellent reminder of the power of compounding in the stock market, as well as the ability of active investment managers.

Conclusion

Beyond the thousands of ISA millionaires that have been created, there has been a much broader benefit, with literally millions of investors becoming empowered to build a valuable, tax-efficient portfolio of ISA investments.

The ISA has changed significantly over the years and, as the recent UK ISA proposal demonstrates, it continues to evolve. Throughout the change, however, it has remained a highly relevant structure for UK investors and its success to date should be seen as just the beginning. The process of long-term compounding – Albert Einstein’s “eighth wonder of the world”10 – may mean that many more ISA millionaires could be created in the years ahead.

From the start, the ISA has been a highly suitable home for investment trusts, and that continues to be the case today. Investment trusts are a highly valid route to market for investors that are hoping to be part of the next generation of ISA millionaires.

1 Hansard – 1986 Budget Statement – 18/03/1986

1 Hansard – 1986 Budget Statement – 18/03/1986

2 Hansard – 1998 Spring Budget Statement – 17/03/1998

3 UK Government – Individual Savings Accounts – 18/04/24

4 UK Government – Junior ISAs launch today – 01/11/2011

5 UK Government – What you need to know about the new Lifetime ISA – 17/02/17

6 HMRC – Individual Savings Account (ISA) Statistics – 30/06/22

7 UK Government data – annual savings statistics 2023 – 22/06/23

8 The Openwork Partnership – ISA millionaires hit record high – 01/08/23

9 AIC – ISA millionaires – 13/02/24

10Investors Chronicle – Compound interest – the eighth wonder of the world – 22/09/22

Risk warnings

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.

This document is Marketing material.

Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: + 44 (0)20 7743 3000. Registered in England and Wales No. 02020394. For your protection telephone calls are usually recorded. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock.

Any research in this document has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy.

This document is for information purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer.

© 2024 BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, and iSHARES are trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners.

MKTGH0424E/S-3508439

Tags

Welcome to Kepler Trust Intelligence

Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.