Quantcast
Menu
Save, make, understand money

Blog

BLOG: Breaking the UK out of savings apathy.

Cherry Reynard
Written By:
Cherry Reynard
Posted:
Updated:
24/02/2015

We all know that, as a nation, we don’t save as much as we could, or should be. The uncomfortable truth is this: we’re lazy with money.

The world has been changing fast. People are living longer than ever before due to medical and technological advances. More people than ever are going to university and furthering their education. All of this is fantastic, but we haven’t quite figured out how we’re going to pay for it all yet.

The government has realised this and has put measures into place to help us save. The ISA is a great savings incentive, as it allows you to save or invest your money without paying tax on the gains you make. Historically, ISAs were quite complex. There were different contribution allowances depending on what kind of ISA you had. Transfers could be tricky too, as they were permitted from a cash ISA to a stocks and shares ISA, but not the other way around.

Now though, all of that’s changed. The limit went up to £15,000 last year and all of the restrictions on what you could do with your money went out of the window – you can hold it in either cash or stocks and shares, or any mix of the two. You can transfer into either type of ISA and you still retain the tax benefits. But just how many of us are taking advantage of these benefits?

At Nutmeg, we’ve commissioned some research into the state of ISA saving in the UK. We found that around two in five UK adults are putting money into an ISA, with around half the adult UK population having done so at some point. Despite this apparent keenness to save, it seems we’re not very good at maintaining our interest in how our money is doing.

22 per cent of ISA holders – around seven million people – are clueless as to what returns or interest they might be making on their previous ISAs. That’s despite over a third of people (37 per cent) stating they are well aware that they could be missing out on better returns. A staggering 40 per cent admitted that they couldn’t be bothered to review their savings.

This kind of apathy is destroying our best savings intentions. Even though you might have signed up to your ISA on quite a good introductory rate, these usually come to an abrupt end after the first year. It’s called “rolling off” and your bank doesn’t have to tell you they’re changing your rate, as it was probably in your terms and conditions when you opened the account.

According to data from the Bank of England the average rate offered on a cash ISA in December 2014 was a lowly 1.05 per cent – barely beating inflation. If you’ve got stocks and shares ISAs, remaining in the dark about how much you’re paying for your investments and what you’re investing in is even more dangerous. High fees could be eating into your returns and your money could be sitting in underperforming asset classes. It’s key to keep on top of this.

By tracking down those ISAs you started years ago and transferring them you can see how all of your money is performing in one place, as one cohesive pot. Find a provider that can offer you a well-diversified portfolio of investments for a low cost.

I believe that the financial services industry has to shoulder some of the responsibility for this sorry state of affairs. Companies have made personal finance so complicated that customers aren’t motivated to shop around for the best deals and opportunities.

We need to shake ourselves out of sleepwalking into a savings crisis and take control of our money and our financial future. My vision is for the UK to become a nation of empowered investors. Investing shouldn’t be something that’s just available to the privileged few, it should be open to all – whatever their level of experience or wealth.