ISA savers are looking for simplicity and flexibility from their tax-free savings accounts, research from Alliance & Leicester has found.
The study revealed that only 29 per cent of savers could correctly identify the allowance which can be invested in a Cash ISA
– £3.600 – with 19 per cent not realising that it had been increased from last tax year's limit of £3,000.
And even fewer were able to correctly identify the limit for Investment ISAs
More than a third of ISA
savers said they thought that the rules should be simplified to make them easier to understand.
On the tenth anniversary of when the Individual Savings Account was launched, Alliance & Leicester
has conducted a study which reveals that 43 per cent of British savers still do not have an ISA, with some saying that they are too complicated.
Of those who have not opened an ISA, only 13 per cent said that they are planning on doing so in the next tax year, but savers who do intend to take advantage of their tax-free savings allowance for the 2008/2009 tax year only have until April 5 to invest.
While 57 per cent of savers have opened a Cash ISA, and 22 per cent of those have some of the money invested in a Stocks and Shares ISAs
, there is still some way to go "before ISAs become a stable part of the UK savings portfolio," Alliance & Leicester's research shows.
A&L says that this year's Budget offers an opportunity to simplify the ISA, and the Government has suggested that it might use it to incentive ISAs, possibly increasing the tax-free allowance that can be invested each year.
"ISAs were introduced by the Government to encourage people to save for the future. While take up of ISAs has been positive over the last decade, there are still a lot of people not using them and many continue to find ISA rules confusing," said Reza Attar-Zadeh, director of savings and investments at A&L.
"In order to encourage people to save tax efficiently, the message is clear, ISAs must be simple and flexible; simpler ISA limits, the ability to be able to dip in and top up and for two way transfers between Cash and Stocks & Shares ISAs, will all help."
Meanwhile, the Post Office is encouraging people to take advantage of their tax break from the Government before the tax year ends next month; otherwise they will lose this year's allowance.
Recent research from the Post Office revealed that savers are missing out on a potential £1.33billion in tax-free interest by failing to invest their full allowance in an ISA.
"Each year everyone is entitled to put £3,600 into a tax-free cash ISA, but many fail to do so," said Richard Norman, director of Post Office savings accounts. "Savers are struggling more than ever so now is the time to make sure their cash is working as hard as possible for them.
"Taking advantage of the tax breaks available will earn savers extra money and can help supplement losses in their taxable savings accounts. However, the deadline for this year's tax allowance is fast approaching so people need to act quickly if they want to take advantage of this year's allowance." Compare ISA rates »
© Fair Investment