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.
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 31stJanuary 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.