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ISAs shunned by two thirds of Brits

06 March 2009 / by Rachael Stiles
Two in three Britons are not taking advantage of tax free savings by investing their ISA allowance, research from Birmingham Midshires has found.

With just one month to go before the end of the tax year and this year's tax-free savings allowance is lost, Birmingham Midshires is urging savers to make the most of it by investing their ISA allowance.

The study found that 23 per cent of Brits with savings have used their ISA allowance for the 2008/2009 tax year, while a further 11 per cent intend to move money into a Cash ISA from their savings account before the tax year ends on April 5.

But the remainder of savers will miss out on their tax-free saving allowance unless they get their skates on, Birmingham Midshires warns.

The research also investigated how Brits have changed their attitude towards tax-free saving as a result of the credit crunch, and found that 60 per cent have changed their saving behaviour amid falling savings rates over the past six months.

Of those who have changed the way they save, 15 per cent said that they have saved more, and 13 per cent have stopped withdrawing money from their savings accounts in order to build them up.

But almost a quarter (23 per cent) have withdrawn more from their savings over the last six months than they expected, and eight per cent admitted that they have had to withdraw money from their ISA.

More than 10 per cent of savers who have changed their savings habits in the last six months have moved all of their money into an instant access savings accounts, so that it is easily accessible in case of emergencies such as an unexpected loss of income.

There is also a significant number of savers – 12 per cent – who said they will not be moving any money into an ISA before the tax year ends because the low interest rates negate the benefits of any tax-free savings.

A further 29 per cent of savers said that they do not think they have sufficient savings to necessitate an ISA.

But finding the best ISA rates can still help savers' money grow, Birmingham Midshires argues, and director of savings and investments Tim Hague is positive about the increased number of people who are saving as a result of conditions in the economy.

"The current economic climate is having a positive impact on Britons saving habits as many become more aware of the need to save. Taking advantage of the tax free ISA allowance is one way to ensure that savers are getting the best possible return which is especially important in a low interest rate environment." he said.

"We would appeal to the government to increase Britons' tax free savings allowance since this would give an additional incentive to save during times of falling interest rates."

© Fair Investment Company Ltd