Savers dip into ISAs as credit crunch bites
UK savers have dipped into their ISA savings to the tune of £6bn over the past 12 months, according to research from Abbey.
The main reason for accessing these accounts is to meet the rising cost of living, with 31% of those surveyed by Abbey making withdrawals to cover day-to-day costs. A further 15% said they had dipped into their ISAs to pay mortgage repayments or utility bills. Abbey found that, on average, ISA savers have withdrawn £579 each over the past 12 months, equal to 26% of the average ISA subscription for 2007/2008.
However, shelling out for bills wasn’t the only reason, as 26% of those that accessed their ISA savings over this period put the funds towards a luxury item, such as a holiday or car purchase, while a further 8% used the money for a shopping trip. But 13% of those surveyed used the money to help family and friends, while 24% had to spend the money on an emergency cost, such as home repairs.
Reza Attar-Zadeh, director of savings and investments at Abbey, said: “With the cost of living increasing, a significant number of us are being forced to use our savings to meet the rising costs. You never know when you’re going to need to fall back on your savings and in this respect dipping into them to meet bills such as gas bills is no bad thing.
“On the other hand dipping in to your ISA savings could prove costly in the long term. With a Cash ISA allowance of £3,600 per tax year any withdrawals made can not be replaced, so that part of your allowance would be lost forever. If you’re saving towards a goal such as home deposit or looking to maximise the amount of cash you have put away for retirement then the advice must be to try and reduce your outgoings rather than dip into your ISA pot.”