Despite the tax savings to be made, 60 per cent of people do not have plans to open an ISA in the new tax year, research from Scottish Widows has suggested.
Today marks the first day of the 2009/2010 tax year, and while some will have invested their full ISA
allowance before last night's deadline and already have plans in place to maximise their savings this year, the same cannot be said for everyone.
Only about a quarter of those surveyed said that they will definitely be taking out an ISA in the new tax year, while 16 per cent were unsure whether they will or not.
Those who do not intend to make the most of their tax-free savings allowance cited a lack of spare cash as the reason, saying that they simply do not have enough money to put any aside at the current time.
More than three million respondents – which account for 11 per cent of those not taking out an ISA this tax year – said that they do not know anything about ISAs, with four per cent saying that they are too risky an investment; 27 per cent of people aged 18-24 who are not taking out an ISA say they do not know anything about them.
"It's clear from these results that there is a serious need for greater financial education when it comes to ISAs. Everyone aged 18 and over in the UK has an ISA allowance, and should be taking advantage of this tax-free product," said Gordon Greig, head of savings and investments at Scottish Widows.
While ISAs are not proving as popular as in previous years due to falling interest rates, the Scottish Widows Savings and Investments Report found that 72 per cent of people who did not save anything in the 2008/2009 tax year want to turn over a new leaf.
The research also found that 42 per cent of people who are building up 'long-term' savings for the future would choose a Cash ISA
for this purpose, while Investment ISAs
are widely considered to be a better choice for long-term growth.
"Although saving is a habit that we would always encourage, the number of people choosing Cash ISAs as "long-term" vehicles shows that there is need for a greater understanding of the differences between short term and long term saving products, particularly in the current environment of low interest rates," Mr Greig said. "It is also worrying that the level of awareness and knowledge of ISAs is so low amongst 18-24 year olds. This is the very group that we should be working with to encourage a savings culture now and for the future."Compare ISA deals »
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