Despite the good news that the maximum saving limit for cash ISAs will rise from £3,000 to £3,600 on April 6, many savers are failing to make the most of their current tax-free savings allowance.
According to Nationwide Building Society, 28 per cent of people in the UK with an ISA
cannot afford to save money, and four per cent have no idea how much they have topped up their ISA savings.
While 30 per cent of ISA customers saved up to £1,000 in their account, just 10 per cent saved between £1,000 and £2,000 in their ISA and an underwhelming
20 per cent topped up between £2,000 and £3,000.
Only eight per cent of ISA holders topped up their stocks and shares ISAs by more than £3,000 (current limit for a mini stocks and shares ISA is £4,000).
Director for savings at Nationwide, Matthew Carter, says: "With just over a week to go before the new ISA limits come into force, work needs to be done to encourage people to make the most of their ISA allowance."
Its research found that 58 per cent of respondents would like to save more but feel they cannot afford to do so. Meanwhile, 10 per cent felt they already saved enough and nine per cent prefer to save money in an instant access account.
"With one in ten ISA holders opting to save in a regular savings account instead of their ISA, it's essential that consumers are educated about the benefits of tax-efficient savings and how most ISAs allow instant withdrawals," says Mr Carter.
Those in the 16 to 21 year old age group should also consider opening an ISA, with particularly high interest rates on offer. Alliance and Leicester's Premier ISA Issue 2 is available to customers who open a new Premier current account or Premier 21 current account and allows them to earn 10 per cent gross annual interest tax free with no notice for withdrawals.
However, an incredible 67 per cent of young people in this age group do not even know what ISA stands for and a staggering 10 per cent have never heard of an ISA, according to Alliance and Leicester. Its research found that 16 per cent save no money at all and nine per cent would rather spend money than put it away for a rainy day.
Product manager, Emma Walkley, comments: "Young people should be encouraged to start saving early to ensure their financial future is safe. ISAs are often the first step into the world of regular saving, with customers able to make use of tax free advantages without risk on any amount from £1.
"By offering everyone aged 16 or over a market-leading interest rate of 10 per cent, we hope this will encourage younger people to bridge their knowledge gap, and whether they are working full-time, part-time or doing casual work, it will help make their hard-earned money work harder for them."
If you are still confused about the ISA changes, read our free Guide to ISA Changes
, which explains, in easy to understand language, all the changes in the rules surrounding tax free savings and how they will affect you.
© Fair Investment Company Ltd