The annual ISA allowance is a tax-free gift from the Government which should form an essential part of every investment portfolio, it has been suggested.
Despite the glowing endorsement, Skipton Financial Services said only around a third of the UK adult population currently hold a cash ISA, with many of these failing to top up the account on an annual basis.
Following last year's Budget, ISA allowances will now rise each April, based on the rate of inflation in the preceding September.
Therefore, from 6 April this year, savers will be able to invest £10,680 in a stocks and shares ISA, up from £10,200 at present, or £5,340 in a cash ISA, up from £5,100.
The firm's chief operating officer, Andrew Barker, said it is worth savers remembering that they can invest twice as much into a stocks and shares ISA as they can in a cash ISA, particularly with interest rates remaining historically low.
"With the UK facing a further prolonged period of rock-bottom rates on savings accounts, a stocks and shares ISA looks very appealing," he added.
"All investment portfolios need an element invested in cash but for those with a medium to long-term horizon, if you are prepared to ride the short-term volatility and take a bit more risk, this is a great opportunity to increase the returns from your ISA and maximize this Government allowance.
"It makes sense from an investment point of view and, with taxes likely to rise in the coming years given the state of the nation's finances, it definitely makes sense from a tax point of view."
Mr Barker went on to say that many people are still unaware that it is possible to transfer cash ISA balances into stocks and shares ISAs.
However, he warned that it is important to bear in mind that unlike deposits, investments can go up and down, meaning the original capital could decrease.
He also warned that whilst transfers can be made from a cash ISA to a stocks and shares ISA, savers are unable to transfer the other way.
"With the end of the current tax-year looming, we would urge people to take advantage of their full ISA allowance, or risk losing it forever and further lining the Chancellor's pockets with your hard-earned money," he concluded.
Looking for a cash isa - Compare best cash isa rates and best isa rates for transfers
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