ISA allowances for the current year will expire on April 5th 2010, leaving savers just weeks to soak up the remainder of this year’s opportunity for tax-free ISA savings of up to £7,200.
New figures from National Savings & Investments (NS&I)* reveal that only 15% of Britons understand the new Individual Savings Accounts (ISA) allowances that will come into effect on April 6th, the start of the new tax year, and enable higher levels of tax-free savings next year. These raise the maximum levels of ISA savings to £10,200 per person from then on.
The NS&I discovered that 25% of people wrongly believe that ISA allowances will remain the same in the next tax year, 24% were aware there will be changes but were unsure how much they will be, and 10% incorrectly thought the higher ISA allowances would apply to over-50s only.
A clear need for guidance and independent financial advice on ISA savings was signalled by the 16% of people who claimed they had not opened an ISA account because they found ISAs ‘confusing’. Only 58% of ISA investors said they read the terms and conditions of their ISA before investing.
Of those already saving in ISAs, only 16% said they were determined to use up their full ISA allowances, while 15% said they did not expect to use their full ISA allowance.
Halifax revealed recently that ISAs are now held by 37% of households in the UK, a total of 14.2m ISA accounts in the UK in 2008/09.
Most of these savers fail to fully utilise the potential for tax-free savings in ISAs, however. The Yorkshire and Clydesdale Bank has calculated that, since ISA accounts were introduced 11 years ago, the average saver has paid just £2,500 into his ISA accounts – utilising less than half their annual allowance.
*Source: ‘The Savings Survey’ of 2007 UK adults, NS&I / TNS, January 2010
