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Savings increase despite slowing ISA growth

Savings increase despite slowing ISA growth

Category: Savings
Author: Derin Clark
Date: 04/04/2019

This year's ISA season has not seen the significant increase in rates and products we've come to expect in recent years before the start of the new tax year, research from Moneyfacts.co.uk reveals.

While there has been an increase of 21 ISA products year-on-year, with 420 available at the start of April 2019 compared to 399 April 2018, this increase is not at the levels normally seen at this time of year. ISA product rates have not reached the highs expected during ISA season, with the average long-term fixed cash ISA rate increasing by just 0.1% gross, from 1.52% gross in April 2018 to 1.62% gross in April 2019, while the average one-year fixed cash ISA rate increased by 0.18% gross, from 1.16% gross in April 2018 to 1.34% April 2019.

Savers looking to get the best savings deal may find a better return among non-ISA products. The current average long-term fixed rate is at 1.87% gross, which is 0.25% gross higher than the average long-term cash ISA rate at 1.62% gross. For savers looking for a short-term home for their funds, non-ISA rates are still higher by 0.08%, with the average one-year fixed rate at 1.42% gross compared to the ISA equivalent rate of 1.34% gross.

Rachel Springall, finance expert at Moneyfacts.co.uk, commented: "The number of ISAs on the market has surpassed levels seen in last season's peak however, there is still less choice than if savers were to focus their attention on non-ISAs, where the market is saturated with an array of different deals. Indeed, if savers picked the best easy access ISA today, they will find it pays less than the best non-ISA.

"Thankfully, savers who do want to utilise their ISA allowance but also desire the flexibility of easy access and also a more inflated rate on fixed – can choose a provider who will allow them to split their ISA money between multiple ISA products. There are also flexible ISAs that allow money to be withdrawn and replaced in the same tax year without it counting any further towards your annual ISA allowance."

Young savers on the rise

Despite the amount of ISA products, and rates on offer not rising significantly, the number of people looking to increase the amount they save on the up. A study by Charter Savings Bank found that more than half of adults (53%) have either started to or are considering saving more than in previous years, and it is 18-30-year olds (73%) who are the most likely to be saving more. The study revealed that 55% of savers aged 18-30 are looking to open fixed savings accounts, 49% are considering easy access accounts and 56% are considering opening a range of savings accounts to have a balance between fixed and easy access savings.

According to the study, the reason for the rise in adults looking to save is due to rising living costs and political uncertainty. The bank found that day-to-day living costs were worrying people most, with nearly three-quarters of adults naming rising energy bills (73%) or rising food costs (72%) as financial concerns for the year ahead. For young adults, political uncertainty is the primary financial concern, with over three-quarters of 18-30-year olds (77%) worried about what political changes in 2019 might mean for their finances.

Paul Whitlock, executive director, Charter Savings Bank, commented: "Uncertainty seems to be a way of life currently, with political and economic concerns rising in tandem with living costs.

"It's reassuring to see so many people, particularly young people, taking their savings seriously in such a volatile climate. With even small amounts of money growing over time, saving from an early age is a great way to ensure financial resilience.

"Though savers are increasingly looking for safety, it can be difficult to decide on the right home for your cash and whether to lock in rates or opt for the flexibility of easy access."

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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