Mixed news ahead of ISA season

  • 24% of Britons will take advantage of their full ISA allowance, while 18% will use some of their allowance in this tax year.
  • Only 9% of Britons are put off by interest rates and returns, compared to 10% last year and 30% in 2010.
  • 55-64 year olds are the most likely to invest their full ISA allowance this financial year (43%).

There has been an increase in the number of people who will use at least some of their annual ISA allowance, according to new research from NS&I. Just under a fifth (18%) have said they will use some of their allowance in this tax year, compared to 16% last year and 15% in 2009/10. However, just under a quarter of Britons (24%) will take advantage of their full ISA allowance of £11,280 in this tax year (including Cash and/or Stocks and Shares), a decrease from 28% in 2011/12. In fact, an increasing number of Britons say they will be unable to invest in an ISA at all, stating they cannot afford to: Just under a third of Britons (32%) are not investing in an ISA as they do not have the money to put aside and this figure has increased from 28% last year.

Interestingly, the demographic of ISA savers has shifted in recent years. Those in the 55-64 age group are now the most likely to utilise all or some of their ISA allowance, at 54% in 2012/13. Last year those in the 25-34 age range were the most efficient ISA savers – with 51% using some or all of their ISA shelter, while in 2009/10 it was those aged 65+ who made most use of their ISA limit, with 42% using some or all of their allowance.

Despite the Bank of England’s base rate remaining at 0.5% and the continued low interest rates across the savings market, only 9% of Britons are put off by interest rates and returns offered by ISAs. This is in stark contrast to the 30% of savers put off by low interest rates in 2009/10.

The tax-free status of an ISA has become even more attractive in recent times. Three years ago just over a quarter of savers (26%), given the economic circumstances, would rather have invested in a different product other than an ISA, however in more recent times, fewer Britons would rather invest in other savings products: 6% of Britons were looking to invest in other products last year, whereas just 4% are now preferring to invest elsewhere.

Crucially, the research suggests that the understanding of financial products amongst Britons is increasing. Three years ago, as many as 15% admitted to not knowing what an ISA was, however that figure had dropped to 8% last year and now stands at a mere 6%.

John Prout, NS&I’s Retail Customer Director, said: “ISAs are usually the first port of call for people looking to save and it’s encouraging that almost half of us are utilising the tax-free shelter that ISAs provide. With the end of the financial year fast approaching, now is an important time for everyone to review their savings.”

NS&I has compiled the following advice to help savers make the right choice when it comes to investing in ISAs:

  • Manage your risk: Just over a quarter of Britons (26%) now say they would prefer to invest in cash ISAs as opposed to equity based ISAs, due to the riskier nature of the stock market. This has increased from 21% last year.
  • Be aware of the small print: Just 16% of Britons admitted to reading all the conditions when investing in an ISA, including notice periods, charges and penalties. Alarmingly, this has dropped from 18% last year.
  • Do your research to ensure you make the most of tax-free savings: 6% of Britons acknowledged they were unaware of the maximum allowance per year for investing in an ISA.
  • Don’t be afraid to ask. Many people are not confident about buying financial products because they do not understand the jargon. Further help and information on savings tips and personal finance are available at: http://www.nsandi.com/you-and-your-money

Senior NS&I spokespeople are available to discuss the results.

About this research

The most recent NS&I research was conducted by TNS, among 1,206 Great British adults aged 16+ between 5th and 7th February 2013. The research from 2012 was conducted by TNS, among 2,481 Great British adults aged 16+ between 10th and 16th February 2012.The research from 2010 was obtained from the NS&I Savings Survey conducted by TNS, among 2,007 Great British adults aged 16+ between 29th and 31st January 2010.

About NS&I

NS&I is one of the UK’s largest financial providers with more than 25 million customers and over £100 billion invested. All products offer 100% security, because NS&I is backed by HM Treasury.