This year, savers are able to squirrel away up to £15,240 out of the taxman's reach, but the question is, are they making the most of it? According to research from GE Capital Direct, most people aren't.
The figures show that UK savers aren't taking full advantage of their higher annual allowance, with typical deposits into a cash ISA totalling £3,812 last year – just a quarter of the full allowance for the 2015/16 tax year – while 29% of respondents admitted that they haven't saved anything at all. Based on GE Capital Direct's calculations, this means that savers missed out on £11,888 worth of tax-free savings last year, the equivalent of £312bn overall.
Looking ahead, consumers expect to put away a similar £3,989 by the end of the current tax year, but 27% expect this total to be closer to zero, rising to 36% among those aged 65+. This could be due to a simple lack of disposable income, with 58% of those without an ISA admitting that they can't afford to save.
Unfortunately, recent measures to incentivise saving and improve the landscape don't appear to be having the desired effect. Despite the announcements in March's Budget of a new Personal Savings Allowance, more flexible ISA provisions, a higher allowance (something that 71% were aware of) and support for first-time buyers in the form of a Help to Buy ISA, 72% of respondents said that they haven't been encouraged to save more money.
But why? Well, seven in 10 say that they don't have any disposable income to save – all the incentives in the world can't encourage people to save if they simply don't have anything left over at the end of the month – while over a quarter said schemes like Help to Buy aren't relevant to them, and a further 22% said the low interest rate environment is deterring them from saving. However, there are good deals out there for those that shop around – check out the best ISAs rates to see if you can really maximise your savings.
"Despite strong awareness of increased ISA allowances, our research shows that many UK savers are missing out by failing to fully utilise this limit to maximise their tax-efficient savings," said Julie Edwards, head of Retail Deposits at GE Capital Direct. "[However, our] research shows that knowledge of beneficial savings measures increases once in force, so we expect to see more interest in the new developments for savers as they come into effect.
"That's not to say that investing the full ISA allowance each year is easy, but saving little and often over time will really add up, and future changes – such as allowing savers to withdraw and replace funds in an ISA in the same tax year without losing the tax-free advantage – may be just the boost needed to encourage more people to regularly save tax-free."
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