Brits remain confused by Isas
Published On 13 March 2007
Individual Savings Accounts (Isas) are continuing to baffle millions of Brits, according to new research.Alliance & Leicester has reported that 20 per cent of British adults see the Isa system as too complicated to understand. The result is that millions are missing out on potential tax benefits amounting to £73,611 during the course of an individual's lifetime.
A good rate of interest has been identified as the most important factor considered by Brits when choosing a savings account. Only 40 per cent, however, believe that it is important to consider the tax implications of savings, despite the considerable advantages associated with Isas.
Isas were first offered to British savers in 1999, but it seems patently clear that many individuals remain very much in the dark as to the basic details of this popular saving strategy. A significant proportion (14 per cent) of those without a mini cash Isa have admitted that they simply do not know what one is, while five per cent do not know where they should go to get one.
There are also a number of misconceptions related to Isas, many of which are preventing savers from enjoying the full benefits of the scheme. A sixth of those questioned by Alliance & Leicester claimed that they did not have enough money to open or save in a mini cash ISA, but it is actually possible to open one of these accounts with just £1. A further five per cent are concerned that they would not have immediate access to their money, but many accounts do indeed grant this privilege.
Ross Dalzell, manager for savings at Alliance & Leicester, said: "The key reasons people gave for not having opened a mini cash Isa are all surmountable – in the main you can open one with as little as £1 and the balance is available for withdrawal at any time.
"It is also concerning that so many young people are holding on to cash savings. It's possible to open a cash ISA from the age of 16, so it's best to get into the savings habit early. Isas are more flexible than people realise and opening a mini cash Isa really is simple, as 81 per cent of people we surveyed agreed."
A separate report from Fidelity International reveals that existing Isa investors also have a number of unresolved questions. A quarter of those currently investing in an Isa are uncertain about the best places to invest their allowance this year. One in ten of those surveyed as part of the Investor Watch said that they have been caught out in the past, leading to a basic suspicion of equities.
A similar proportion are completely unsure as to which asset class they should invest in and are becoming anxious as the tax year end draws ever closer.
Anabel Brodie-Smith, communications director with the Association of Investment Companies, has warned investors that waiting until the last minute is an extremely dangerous strategy.
"With just under a month to go until the April 5th deadline, investors may think they have plenty of time to make their Isa purchases," she said.
"Whilst it's easy to leave things to the last minute, investors should be aware that many investment companies have deadlines well before then, so it's important to act now to avoid disappointment."
Research from Nationwide indicates that 60 per cent of the UK adult population have failed to open an Isa. The study also found that many of those who do hold an Isa are habitually failing to make the most of their annual allowance.
