Savers not making the most of their ISA allowance

New research from AA Savings shows that while two-thirds (67%) of adults say they ‘save what they can, when they can' in the current economic environment, only 40% of them are taking advantage of tax-free ISAs.

This comes with the launch of a new easy-access AA Internet Access ISA as the end of the 2011/12 tax year approaches.  It offers a best-buy 3.50% AER up to the £5,340 cash ISA allowance for the current tax year.

The AA's research also showed that the majority of savers (44%) still consider that Cash ISAs are best used for long-term savings (compared with 53% last year).  Only 12% believe that cash ISAs can also be used as an instant-access account (up slightly from 10% last year). 

This is the third year that AA Savings has offered its Internet Access ISA which has the advantage of allowing unlimited deposits and withdrawals, tax free up to the ISA limit.  Minimum deposit is £2,500, although withdrawals that leave a lower balance are permitted.

Mark Huggins, director of AA Savings says: "Although the majority of those surveyed are aware of the tax-free status of ISAs (84%), fewer than half are taking advantage of them.

"Most people want to be able to get their hands on their cash when they need to (60%) and for them, the AA Access ISA makes perfect sense."

Mr Huggins adds: "Everyone able to save should take maximum possible advantage of their tax-free Cash ISA allowance whether they want instant access to their funds or intend to leave it untouched."

Savers can open this AA Access ISA online at theAA.com/savings from 9th March 2011.

The AA Access Cash ISA (issue 4):

3.50% AER including 3.00% 12-month fixed bonus
Easy-access - unlimited deposits and withdrawals
Minimum £2,500 - maximum £5,340 (however, withdrawals can be made below the minimum without closing the account)
AA Access ISA is an Internet account
Full terms and conditions at theAA.com/savings
Transfers from other cash ISAs are not allowed.