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ISA withdrawal warning

ISA withdrawal warning

Category: Savings

Updated: 25/09/2009
First Published: 25/09/2009

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 It is now over 6 months old so the content may be out of date.

Hard up households have dipped into £11 billion worth of ISA cash in the last year, almost three times as much compared with the previous 12 months.

More than seven million savers are estimated to have raided their ISA savings with the average withdrawal amounting to £1,573, according to Abbey Savings.

At the same time last year, the average withdrawal was just £579.

When questioned on why they had raided their accounts, almost two fifths (39 per cent) said the need to cover general living expenses was the main reason for their withdrawals.

More than three million people (13 per cent) turned to their savings because of redundancy or reduction of income, while five million (19 per cent) blamed unexpected expenses such as home repairs.

Those with young children appear to be relying on savings to a greater extent than most, withdrawing 32 per cent (£4,015) of their savings over the past 12 months and citing general living expenses as the major cause (58 per cent).

Luxury purchases were the reason behind almost a quarter (22 per cent) of withdrawals and high street purchases behind five per cent.

"The sharp increase in the amount that people are withdrawing shows that many of us may have needed our savings to make ends meet, and just goes to highlight the importance of having savings to fall back on," said Reza Attar-Zadeh, director of savings and investments at Abbey. "There's no denying it's been a tough year, so it's understandable that people have turned to their savings in these trying times.

"It's vital that we all keep some money aside in the event of an emergency but raiding your ISA account can prove costly in the long term as you can't replace what you take out."

From 6 October, the ISA limits will increase for the over 50s from £7,200 to £10,200, including £5,100 for cash ISAs (previously £3,600).

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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