BRIEFING - ISA ISA Baby - Assessing the Government’s policies to encourage household saving
14 January 2023
The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. [...] Despite this, 41 per cent of the total benefit from reduced tax liability is projected to go to the top decile of the income distribution in 2023-24, reflecting the upward skew to the savings distribution and the fact that the progressive structure applies to individuals rather than households. [...] Indeed, the average median value of savings within income deciles in the top half of the distribution is just under £5,500 per adult, not hugely higher than the £3,000 for the bottom half of the income distribution.8 However, when we consider the prevalence of no savings at 4 Some of the variation in saving rate reflects difficulties in comparing on a like-for-like basis across countries. [...] For example, in 2015, the highest income fifth of families in the UK had a slightly higher saving rate than the equivalent group in Ireland, but the saving rate was around 10 percentage points lower for those in the second income quintile in the UK compared to Ireland.9 And low-income people in the UK are more likely to have a low stock of savings as well: in 2017, 65 per cent of people in Great B. [...] LISAs also benefit from the tax-free saving on other ISA accounts but, given the stock of savings in these accounts to date and the lower annual limit, the tax-free part of the scheme is much smaller in scale relative to the direct bonuses.