Investing
‘Dismal’ rates keep savers away from cash ISAs
The number of people saving into a cash ISA is set to fall by 9% this year, as dismal rates keep savers away.
According to research by uSwitch.com, just over half (54%) of Brits plan to put money into a cash ISA this tax year – compared to 63% last year.
The average amount consumers are planning to save into a cash ISA this tax-year has also decreased by £121 – down from £3,723 last year, to £3,602, with fewer than four in ten (38%) intending to take full advantage of their allowance of £5,760.
This means 23 million UK adults are failing to benefit fully from the tax-free allowance, losing out on £191bn in tax-free savings collectively.
One in ten (11%) of those polled blamed low interest rates for deserting cash ISAs- claiming that it is not worth putting money into one, while a fifth (19%) said they could not afford to save.
While the base rate has remained at a historic low, but steady – the average cash ISA rate this year has fallen to 1.64% from 1.87% this time last year.
These poor rates have clearly deterred consumers from investing in an ISA with 43% using their current account as their main way of saving, the report said.
Some of the best rates include Nationwide’s Flex Direct Account, which pays 5% AER on savings and Santander’s 1 2 3 Current Account, which offers up to 3% AER as well as 1% cashback on household bills paid by direct debit.
Jafar Hassan, personal finance expert at uSwitch.com, said: “This ISA season is yet again proving to be a damp squib, with dismal rates unlikely to spark a fire under savers. Even locking away your money won’t give you much to shout about with very few short-term, fixed-rate cash ISAs offering more than the tax-free 1.75% savers can earn with easy-access accounts.
“Unfortunately we haven’t seen the usual battle between banks and building societies to offer the best rates and lure savers, and as we near the end of February far fewer new cash ISA savings accounts have been launched compared to previous years. To make matters worse, many of the top deals on both cash ISAs and taxable accounts have disappeared in recent weeks – the Post Office has closed its Premier Cash ISA to new savers and Virgin Money has cut the rate for new savers on its Cash ISA.
“Luckily, current accounts are offering consumers a lifeline. With rates of up to 5%, it’s no surprise that savvy savers are turning their backs on ISAs and putting any money they can into a current account, where it will work much harder for them.”
Top 1 year cash ISA rates
| Provider and Account Name | Minimum | Maximum | Tax Free/AER | Term-Maturity Date/Access | Transfer In? |
|---|---|---|---|---|---|
| Britannia Select Access Cash Isa Issue 2 | £500 | £150,000 | 1.75% | Easy Access | Y |
| KRBS 60 Day Notice Cash ISA Issue 6 | £1,000 | £150,000 | 1.80% | 60 Days’ Notice | Y |
| Britannia Fixed Rate Cash ISA to 30/01/15 | £5,760 | £150,000 | 1.85% | Matures 30/01/2015 | Y |
| Virgin Fixed Rate Cash ISA Issue 75 | £1 | £2,000,000 | 2.40% | Matures 15/01/2017 | Y |
| Leeds 5 Year Fixed Rate ISA (Issue 3) | £1 | £150,000 | 3.05% | Matures 31/03/2019 | Y |
Source: Savings Champion
