The Individual Savings Account (ISA), introduced in March 2016 to support household wealth building through comprehensive asset management, has surpassed 8 million account holders and 50 trillion won in contributions in roughly 10 years since its launch. The number of brokerage-type ISA account holders has also exceeded 7 million.
The Korea Financial Investment Association announced on February 26 that, as of the end of January, the number of ISA account holders stood at 8.07 million, with total contributions amounting to 54.7 trillion won.
The number of account holders passed 8 million just two months after it exceeded 7 million at the end of November last year, when the figure reached approximately 7.19 million.
Total contributions surpassed 50 trillion won seven months after breaking through 40 trillion won at the end of June last year.
In particular, contributions increased by 6.4 trillion won in January alone, marking the largest monthly increase on record. Of this, brokerage-type ISAs, buoyed by the strong performance of the domestic stock market, accounted for 5.9 trillion won, driving the overall growth in contributions.
The size of the ISA market has continued to grow since the introduction in 2021 of the brokerage-type ISA, under which account holders directly invest in and manage financial products.
By ISA type, brokerage-type accounts, where customers directly select and manage financial products, numbered 7.01 million, accounting for 86.9% of all ISAs. Contributions to brokerage-type ISAs totaled 37.7 trillion won, representing 68.8% of the total.
In contrast, the number of trust-type accounts, in which trustees such as banks and securities firms manage customized products according to the client’s investment instructions, was 917,000 (11.4%), down by 802,000 from 1.719 million at the end of 2020. Contributions to trust-type ISAs amounted to 15.7 trillion won, or 28.6% of the total.
Discretionary-type accounts, where assets are entrusted to investment professionals based on model portfolios proposed by securities firms and banks, also declined over the same period from 220,000 to 142,000 (1.8%), a decrease of 78,000. Contributions to discretionary-type ISAs came to 1.4 trillion won, accounting for 2.6% of the total.
By financial sector, the popularity of brokerage-type ISAs meant that accounts opened through securities firms were the most numerous, with 7.044 million account holders (87.3%) and contributions of 37.9 trillion won (69.3%). In contrast, banks, which mainly handle trust-type ISAs centered on deposits and savings, had 1.025 million account holders (12.7%) and 16.8 trillion won in contributions (30.7%).
Of the contributions to brokerage-type ISAs, 46.8% are invested in exchange-traded funds (ETFs) and 34.2% in individual stocks. For trust-type ISAs, deposits and savings account for 91.4%, while for discretionary-type ISAs, funds make up 97.1%, the highest proportion in each category.
ISAs are tax-advantaged accounts that allow investors to hold a variety of financial products, such as domestically listed stocks, funds, ETFs, and deposits and savings, in a single account. The biggest advantages of ISAs are the offsetting of investment gains and losses and the resulting tax benefits. After a certain period, profits and losses among financial products within the account are offset, and based on the net profit, up to 2 million won is tax-exempt for standard ISAs (up to 4 million won for low- and middle-income ISAs). Any amount exceeding these thresholds is subject to a low, separate tax rate of 9.9%. Additional compound interest effects can also be expected through tax deferral until the account is closed.
Furthermore, with the government’s announcement in January of the introduction of the new “Productive Finance ISA,” which strengthens tax incentives for investments in domestic stocks and funds, the National Growth Fund, and Business Development Companies (BDCs), domestic investment through ISAs is expected to become even more active going forward.
Han Jaeyoung, Head of the K-Capital Market Division at the Korea Financial Investment Association, said, “Public interest in ISAs is increasing, supported by government policies to promote long-term investment in domestic stocks, such as the introduction of the Productive Finance ISA,” adding, “We hope ISA incentives will be further expanded so that ISAs can function as a key driver not only for household asset building but also for a virtuous cycle in the K-capital market.”
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