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Savers making the most of ISAs

Savers making the most of ISAs

Category: ISAs

Updated: 28/04/2014
First Published: 28/04/2014

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 It is now over 6 months old so the content may be out of date.

ISAs are easily the most tax-efficient way to save, with any money you put in generating interest that's entirely free from tax – no need to fear the taxman here! Happily it seems that more and more people are realising the benefits that ISAs can offer, with statistics revealing record levels of subscriptions in the year 2012/13.

The stats

Figures from HMRC, drawn from data that financial institutions are required to provide, have revealed that around 14.6 million adult ISAs were subscribed to in 2012/13, up from 14 million the previous tax year. The value of those subscriptions is equally as impressive, with around £57 billion put into adult ISAs over the year – an increase of 8.6% over the year and a new historic high, with increased allowances likely to have fuelled this savings trend.

Around 80% of subscriptions were made to cash ISAs rather than stocks and shares versions, highlighting the clear preference for cash savings among the majority of ISA investors. The average subscription per saver has increased considerably over the last few years, again likely to be the result of higher limits, with the average amount saved in 2012/13 reaching £3,927.

However, although cash ISAs are more popular overall, those that do opt for stocks and shares save considerably more – cash investors saved on average £3,501 in 2012/13, while stocks and shares investors put £5,629 into their account. This could perhaps be down to the higher subscription limit for stocks and shares, so it'll be interesting to see whether the breakdown remains similar when the NISA limit of £15,000 – which can be saved entirely in cash should the investor choose – comes into force in July.

Why not join them?

ISAs could prove to be even more beneficial when these new rules come into play, offering more choice and flexibility in how – and how much – you can save, with a greater level of tax-efficiency and potentially a higher level of subscriptions as a result.

In the meantime you still want to make the most of your allowance for the current tax year, so why not join the millions of other savers who are doing just that? Saving from as early as possible in the tax year gives you more scope to earn interest – interest that's entirely free from tax – and with most providers allowing you to top up your account to the full NISA limit in July there's nothing to stop you from subscribing straight away.

To get the best returns you'll probably have to opt for a fixed rate account, and currently the top pick comes from Skipton with its Online 5 Year Fixed Rate ISA paying 2.75%. If you're looking for easy access to your cash then Cheshire Building Society offers a market-leading 1.60% on its branch-based Easy Saver ISA, or what about stocks and shares versions? These ISAs come with a higher level of investment risk but have the prospect of better returns too, so check out our comparison table or get in touch with the experts if you want additional advice.

Given that so many savers are making the most of their ISAs it's high time you were one of them, and really, there's no reason not to. The opportunity to generate interest entirely free from tax should never be overlooked, and with the NISA limit set to raise the bar further you could benefit even more. Why not get started?

What next?

Compare ISA rates
Take out a stocks and shares ISA

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.