Subscribers to the Individual Savings Account (ISA) have topped 10 million, 10 years and five months after its introduction. As a rising stock market has coincided with demand for tax savings, subscribers and invested funds are growing rapidly, led by brokerage-type ISAs.

The Korea Financial Investment Association said on Sept. 29 that as of end-August, ISA subscribers totalled 10.05 million and the subscribed amount was 76.5 trillion won.

This is the first time ISA subscribers have exceeded 10 million since the product was introduced in March 2016. Based on the National Data Portal's registered resident population of about 44.07 million adults aged 19 or older as of August, it means about 1 in 4 adults holds an ISA.

The pace of subscriber growth has also accelerated. After reaching 8 million as of end-January, ISA subscribers rose by more than 2 million in seven months. That is equivalent to about 290,000 new subscribers a month so far this year.

Over the same period, the subscribed amount also rose by more than 20 trillion won, to 76.5 trillion won from about 55 trillion won.

The association sees this as a result of investment demand flowing into ISAs, which allow investors to manage deposits, funds, stocks and other financial products in a single account while receiving tax benefits, amid this year's KOSPI rise and broader participation in the stock market.

By type, brokerage-style accounts, in which subscribers choose and manage products directly, led growth.

As of end-August, brokerage-style subscribers stood at 8.975 million, accounting for 89.3 percent of the total.

In contrast, trust-style subscribers fell by 797,000, to 922,000 from 1.719 million at end-2020. Their share of total subscribers is 9.2 percent.

Discretionary management subscribers, who entrust management to experts based on model portfolios presented by brokerages and banks, also fell over the same period to 152,000 from 220,000.

By financial sector, subscribers through brokerages totalled 9.005 million, accounting for 89.6 percent of the total. This reflects that brokerage-type ISAs can be opened only at brokerages.

Bank subscribers stood at 1.045 million, accounting for 10.4 percent. Compared with 1.783 million at end-2020, this is a decline of 738,000.

Assets actually managed within ISAs also differed clearly by type. Within brokerage-type managed assets, exchange-traded funds (ETFs) made up the largest share at 50.8 percent, and stocks accounted for 36.1 percent. In trust-type accounts, deposits and instalment savings made up 88.2 percent, while funds accounted for 98.8 percent in discretionary accounts.

The share of younger subscribers also expanded. Among total ISA subscribers, the share of those in their 20s and 30s rose 8.3 percentage points to 41.1 percent at end-August from 32.8 percent at end-2020.

By age group, the share of brokerage-type accounts was highest among those in their 20s and 30s at 95.1 percent, followed by 40s at 91.2 percent and those aged 50 or older at 81.9 percent. Among those aged 50 or older, the share of trust-type accounts was relatively high at 16.0 percent.

An ISA is a tax-saving account that allows investors to manage domestically listed stocks, funds, ETFs, deposits and instalment savings in a single account.

Based on net profit calculated by offsetting gains and losses from financial products within the account, tax exemptions apply up to 2 million won for general accounts and up to 4 million won for low-income accounts. Amounts above that are taxed separately at 9.9 percent, and taxation is deferred until the account is closed.

Han Jae-young (한재영), head of the K Capital Markets Division at the Korea Financial Investment Association, said, "This milestone of ISA subscribers topping 10 million shows that ISA has established itself as a national wealth-management account." He added, "Along with the productive finance ISA set to be introduced soon, an effect is expected in which funds in the market flow into the domestic market."