Brits lose nearly £1bn in missed ISA earnings
Savers are missing out on more than £970m of interest by not using their ISA allowance with more than eight million not putting a single penny into their tax-free account this year.
Figures from Barclays reveal that while the average UK saver has £20,000 in savings, those with a cash ISA tend to have considerably more – around £42,000.
But 40% haven’t made a single deposit into any type of ISA during the current tax year, leaving them almost a billion pounds worse off in lost earnings as their cash has been stored elsewhere.
Based on a study of 2,005 people, Barclays said that 21 million Brits have a cash ISA, but only 16% are taking full advantage of the £15,240 ISA limit which can be split between a cash account or a stocks and shares account.
It also found that 77% of cash ISA holders are unaware that any money paid in counts towards the annual ISA allowance even if it’s subsequently withdrawn.
However, from 6 April, savers will be given more flexibility, allowing them to dip into their savings and retain the tax break if they replace their funds that same tax year. See YourMoney.com’s ISAs: your back-to-basic guide for 2016 for a run-down of the key information you need to know.
Savers have until Tuesday 5 April to take advantage of the current tax year’s ISA allowance.
Clare Francis, savings and investing expert at Barclays, said: “While it’s encouraging that so many people are able to set aside money for savings, the relatively low number using their full ISA allowance suggests they may not be making their savings work as hard as they could. Average savings are higher than the amount needed to fill an ISA, but it appears low levels of awareness around the allowance and how it works could be leaving savers needlessly missing out.”