Nationwide figures suggest savers are failing to benefit from ISAs
Studies show that most Brits fail to make the most of their individual savings accounts allowance.
A large number of those that have individual savings accounts (ISAs) are not taking full advantage of the tax free benefits available through these products.
According to Guy Simmonds, marketing controller for investments at Nationwide, only a third people who make use of a Nationwide ISA are saving the maximum cash ISA allowance (£5,100).
Mr Simmonds also said that figures collected from Nationwide showed that around a fifth of Britons are failing to put any savings aside into savings accounts.
“Why they are not saving could be [down to] a whole host of reasons from not having a disposable income because of the current economic climate, to not trusting banks or building societies with their money,” he claims.
However, older people appear to be more receptive to making provisions in online savings accounts and other types of ‘nest eggs;’ with the figures indicating that there is “a very high proportion of savers aged over 50″.
Meanwhile, studies carried out by Saga showed that since the ISA allowance increased for the over-50s last October, 41% made full use of the new tax-free limit.
Savers could be missing out
Many savers starting off will search for the best ISA rates, but the high rates offered tend to only last for 1 year, unless the account has a fixed rate for several years. This means that once the bonus period expires, the ‘first attractive’ rate drops to a less respectable offer.
The problem comes when savers lose track of what is going on with their account, earning way below average on their savings.
To avoid this, it is recommended that saver review their ISAs at least once a year (unless they have opted for a fixed rate ISA), and if necessary switch to a higher paying account.
Some fixed rate accounts pay over 4% if you’re willing to lock your cash up for a few years in a fixed rate account, but if you want an account that allows you to access your funds when you need them without being penalised for doing so, consider the Nationwide ISA, offering 2.25% AER (over 4 times the current base rate) with instant access to your funds.
However, if you really want to make your savings work for you, you may be happier to go for a fixed rate ISA. Nationwide’s Champion ISA pays 4.4% based on a three-year fixed term, while the one-year fix offers 2.75%.
Andy Hutchinson, Nationwide’s head of savings, said: “With Champion ISA, savers are safe in the knowledge that they will not have to chase competitive rates round the High Street, as Nationwide will do that for them.
“For those who prefer to manage their accounts online, we have also launched the instant access online e-ISA paying a competitive interest rate.”
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