Many Brits don’t understand ISAs

According to research from National Savings and Investments (NS&I), people in Britain are not yet planning for the changes in Individual Savings Account (ISA) entitlements that will come into force in April this year, and as such, risk missing out on tax-free returns.

The ISA allowance is currently set at £7,200, but this will increase to £10,200 a year tax free in April. People aged over 50 have been able to take advantage of this change since last October, but come April it will apply to everyone.

The survey’s results show that just 15% of those surveyed understand the new limits, whilst a quarter (25%) were not aware that any changes were planned. 24% are aware that changes are afoot but aren’t sure what they will be, whilst 10% of respondents think that the ISA limit will be higher for over 50 year-olds only.

However, it is not just the changes that Brits are unsure of, but ISAs themselves. 16% of respondents said that whilst they were aware of ISAs they had not invested in one because they find them confusing, whilst 10% admitted that saving money in an ISA this year had not occurred to them.

Only 16% of respondents stated that they will definitely use their full tax-free ISA allowance this year, while 15% said that they will take up a proportion but not all of it. 29% of people said that they would only use a proportion of their allowance because they cannot afford to use the full amount.

Of those people aware of ISAs, 35% said that they had been put off them by the current low rates on offer and 31% said that the current financial situation means that they will look at other financial products rather than ISAs. 29% of respondents also stated that wider economic pressures have led them to diversify their financial portfolio rather than concentrating solely on their ISA.

John Prout, Sales Director, NS&I, said:

“The fact that all interest earned in an ISA remains tax-free means it’s a must-have product for people looking to maximise their hard earned savings. Understanding the allowances and reviewing the terms of the product is vital for savers. With less than two months to go until the end of the tax year, there is no time like the present for everyone to check their finances and plan to benefit from tax-free savings.”