As the days begin to lengthen, some of us can’t ignore another signifier of spring. The end of March marks the dawn of a brand-new tax year and, traditionally, one of the greatest opportunities for consumer savings brands. This is ‘ISA season’ – the elusively titled window between February and April that’s usually the trigger for a tidal wave of new savings products and interest rate increases, all designed to entice savers to lock away their cash.
This year is, to nobody’s surprise, a little different. Savings and investments have been a continuously hot topic since the pandemic began (and not just for those of us working in financial services). Savings behaviours have drastically shifted in the past 12 months and the environment is now more complex than ever. The Telegraph today reports that cash ISA savers have endured the worst tax year on record, with returns averaging just 0.63% over the last twelve months. After the Bank of England last year cut the base rate to a historic low, savings brands were left to balance not only their books but consumer expectations too.
In the current climate, consumer finance brands must cater to two distinct groups: those who’ve benefited financially from lockdown and those who have not. However, both these groups have something in common, and that’s evident in an increasing trend towards wanting to keep their cash close. Figures released in February demonstrate an increasing number of ‘accidental savers’, those who are accumulating disposable income in their current accounts. Although this rarely offers a good return, in today’s low-interest-rate environment it’s entirely understandable. Why wouldn’t these accidental savers want to keep their money where they can see it?
Yet, the rise in accidental saving doesn’t mean the end for more traditional savings products. While last year’s returns have been slim, the ISA is now 22 years old with a loyal following – it’s unlikely to be going anywhere. Even Marcus, the challenger bank from Goldman Sachs, has just announced it will launch its first and long-awaited cash ISA. And while allowances may not expand beyond the £20,000 limit any time soon, the ISA is arguably a solid piece of any consumer finance wheelhouse.
But brands must also keep up with changing consumer and cultural demand. Stocks and Shares ISAs have generated plenty of media coverage recently and are particularly attractive to younger audiences with less patience than cash ISA fans. But as DIY investing becomes more commonplace, savers must carefully navigate the risks with the right knowledge and insights. The same applies to sustainable and green finance options. While green-thumbed savers might increasingly turn to these products, brands must be ready to navigate increasing (and justified) scrutiny around how these products work, what they offer to consumers and be transparent about the green projects they support.
This ISA season, for financial services providers, it’s as much about the positioning and the brand as it is about the product and the rate. It’s never been more important for brands to help consumers manage their money. The brands which will continue to win are the ones that do this, but also the ones that will keep products simple; benefits clearly communicated and T&Cs jargon-free. Happily, this is something which challengers and big banks alike have got better at during the pandemic. Hopefully, this is one thing that will live on beyond lockdown.
Above all, as this year’s ISA season draws to a close and Rishi Sunak urges consumers to get out and spend their hard-saved cash, it will be interesting to see exactly how consumer inclinations will shift between big savings and big spending. And when next year’s ISA season rolls around, the one certainty we can all bank on is that things will look very different again.