Cash ISA savers plan to invest an average of £2,737 before the end of this tax year – just 49% of the full allowance, potentially missing out on £822m in tax free interest.

Despite nearly half of the population (45%) having a cash ISA, over half (57%) are not planning to use their full £5,640, with only a fifth (22%) expecting to invest the maximum amount, according to the Post Office’s ISA Savings Report.

Almost three quarters (74%) are unaware of the exact allowance for this tax year.

London is home to the savviest savers, with a third (33%) using their full allowance this tax year, compared to just 13% in Yorkshire & Humber and 17% in the East of England.

Men are also better tax-free savers than women putting away on average £3,031 compared to the £2,423 saved by women on average. Twenty-five per cent of male savers plan to save the full £5,640 allowance, compared with 19% of women.

However, despite saving into a Cash ISA just over a quarter (26%) correctly identified the allowance for the tax year ending on 5th April 2013 (£5,640), with only 17% aware of the increase to the allowance for the 2013/2014 tax year (£5,760).

Henk Van Hulle, head of savings at Post Office, said: “Our research identifies a Cash ISA black hole with many people failing to take advantage of the full allowance. ISAs are an excellent way of boosting your savings in a tax-efficient way. While it is encouraging to see a number of people fully using this tax-free opportunity, a significant number of people are losing out.

“By doing some research people will be in a position to judge the best rates and their long term value, and the ones that will make their savings work as hard as possible for them. Whether investing a lump sum or a little money every month, it all helps people’s hard earned cash go that extra bit further while avoiding tax on savings returns.”