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Are you missing out on a free government handout?

Are you missing out on a free government handout?

Category: Savings

Updated: 15/09/2010
First Published: 15/09/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Nearly two-thirds of all UK taxpayers are missing out on a free government handout, by not taking-up their ISA allowances, new research has revealed.

Out of 30.2 million individual UK taxpayers, Aldermore says only 11.9 million opened cash ISA accounts during the 2009/10 tax year.

Furthermore, the average balance per cash ISA account was found to be just £2,371.

This is significantly less than the £3,600 cash ISA limit that applied at the start of the 2009/10 tax year, and which has subsequently risen to £5,100.

It is thought many savers may have decided not to use up their annual cash ISA allowance as interest rates are so low.

Other people have chosen to sacrifice their savings in order to pay down debts or prop up their incomes.

But as Simon Healy, head of savings at Aldermore, points out, the benefit of cash ISAs is the compounding effect they can have on savings in the years ahead.

"ISA allowances claimed in this and previous years will continue to generate tax-free returns in the future," he explains.

"Although interest rates are low today they are set to rise and the larger a saver's cash ISA fund, the more tax-free benefit they will generate."

What is more, there are still some great cash ISA deals around.

Nationwide's e-ISA currently pays 2.75%, while Aldermore, Northern Rock, Sainsbury's and Santander all offer some cracking deals, particularly if you're willing to put your money away for a set amount of time.

"It's shocking to see that millions of taxpayers are turning their backs on the opportunity to get some of their hard-earned money back from the tax man," added Mr Healy.

"Cash ISAs are a genuine 'money for nothing' opportunity and should be the bedrock of every taxpayer's savings portfolio."

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