ISAs a 'no-brainer' says as savers withdraw £2.3billion

25 February 2009 / by Rebecca Sargent
Savers withdrew a record £2.3billion last month as they saw rates on their accounts steadily drop, but, says, ISAs remain "a very good proposition".

Statistics from the British Bankers Association (BBA) released yesterday show that in January 2009, UK savers withdrew £2.3billion from their savings accounts - the largest amount since BBA records began more than a decade ago.

The BBA put the statistics down to the fact that many savers were struggling to put any money away, while others were simply unhappy with their ever- decreasing savings accounts rates.

"Spending drained cash and savers sought alternative deposit products," said the BBA.

Since the credit crunch began, interest rates have been slashed to one per cent taking saving account rates with them. Figures from the Bank of England show that the average instant access savings account paid 0.51 per cent interest in January, while notice accounts just 0.29 per cent.

However, ISAs could be the answer says, arguing that savers who have used their full Cash ISA allowance each year for the past 10 years will be £2,700 better off than a basic rate taxpayer who saved the same amount outside of an ISA.

Commenting, Kevin Mountford, head of banking at said: "Inflation is on the way down and cash ISAs are paying around 3.25 per cent, so they are still a very good proposition for savers.

"With ISA rates halving from their high of 6.5 per cent last year, it's more important than ever to ensure your savings are working hard for you.

"Saving within an ISA is a no-brainer as the figures suggest – an extra £2,700 over 10 years is nothing to be sniffed at."

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