Half of Brits ‘don’t know difference between cash and investment ISAs’
Nearly half of Britons do not know the difference between a cash ISA and an investment ISA, a survey has found.
This lack of understanding could be costing savers as much as £1,278 in total, according to Scottish Friendly, the authors of the report.
The study revealed that one in four Brits are currently putting aside more than £100 each month, with 38 per cent saying that they see putting money into an ISA each month as a ‘necessity’.
However, with less than two months to go before the new £15,000 ISA allowance comes into force, 48 per cent said they were unsure about the difference between a cash product and a stocks and shares product.
Neil Lovatt, director of ISA and Savings at Scottish Friendly, said: “People will naturally sway towards a cash ISA as it is the simplest to understand and there are a number of misconceptions floating around about what it means to invest in a stocks and shares ISA.”
The study warned that confusion and low cash ISA rates could be costing savers hundreds of pounds each year.
While inflation fell to a five-year low of 1.6 per cent in April, currently no instant-access cash ISAs offers better than inflation rates.
This means that on average a sum of £1,000 invested five years ago in a tax-free deposit account would be worth just £1,007.69 today. This compares to an average return on a UK All-Companies investment ISA which could have returned £2,286.42.
Lovatt said: “One mistaken belief that came through in the report is that people thought that investment ISAs were only for those that were putting aside significant amounts of money each month. This misconception has alienated a significant portion of savers. The reality is that people can open an investment ISA by paying as little as £10 a month and, as we all know, every little counts.”