Impact of Growing Popularity of Brokerage-type ISA...Gap Widens After Surpassing Bank Subscribers in July
[Asia Economy Reporter Park Jihwan] At the beginning of this year, the number of subscribers to securities firms in the Individual Savings Account (ISA) market was less than 10%, but it has surpassed 60% for the first time. The intermediary-type ISA, launched in February, gained great popularity, surpassing the number of bank subscribers in July and further widening the gap.
According to the Korea Financial Investment Association on the 5th, as of the end of August, the number of ISA subscribers at securities firms was 1,521,224, which is 533,106 more than the 988,118 subscribers at banks. The number of securities firm ISA subscribers was 1,287,357 last month, marking the first time since the ISA system was introduced in March 2016 that securities firms surpassed banks by 317,305 subscribers, and the gap has been further expanding.
The market share of securities firms in the ISA market, which had been stuck at around 8%, surged sharply: 8.0% in January, 8.5% in February, 19.1% in March, 35.2% in April, 42.2% in May, 48.8% in June, 57.0% in July, and 60.6% in August. Banks, which once held over 90% of ISA subscribers, have fallen below 40%. This shift is due to the introduction of the intermediary-type ISA in February, which allows subscribers to freely trade listed stocks, prompting many bank ISA subscribers to move to securities firms. Since February, the number of ISA subscribers in the securities industry has increased by more than 1.36 million in six months. Meanwhile, during the same period, the number of bank subscribers decreased by 832,019, from 1,820,137 to 988,118. ISA accounts allow investment in various financial products such as deposits, funds, and equity-linked securities (ELS) with tax benefits. Particularly, the intermediary-type ISA can only be opened at securities firms licensed for discretionary trading, highlighting the concentration in securities firms.
It is expected that the concentration of ISA subscribers in the securities industry will accelerate further. The biggest advantage of ISA is the tax exemption benefit, and stronger tax benefits limited to the intermediary-type ISA are anticipated. Currently, general ISA accounts offer tax exemption on profits up to 2 million KRW upon maturity withdrawal, with excess profits taxed separately at 9.9%. From 2023, with the introduction of the financial investment income tax, even non-major shareholders must pay capital gains tax on stock sales. If profits from trading domestic listed stocks exceed 50 million KRW annually, taxes will be imposed regardless of stock holdings or share ratios. However, by using the intermediary-type ISA, unlimited tax exemption benefits can be received on profits from domestic stocks and equity-type public funds. A securities industry official advised, "Since the intermediary-type ISA allows the annual 20 million KRW contribution limit to be carried forward, it is advantageous to subscribe to the product as soon as possible to secure the tax exemption limit."
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