£51 billion Cash ISA black hole revealed

The deadline for “using or losing” your Cash ISA pot this year is looming, however, Post Office’s ISA Savings Report can reveal there is a £51 billion Cash ISA black hole as savers are failing to make use of their full allowance.

Nearly half of the population (45%) have a Cash ISA. Over half (57 per cent) of those with a Cash ISA are not planning to use their full £5,640, with only a fifth (22 per cent) expecting to invest the maximum amount. Almost three quarters (74 per cent) are unaware of the exact allowance for this tax year (2012/2013). 

The report found that Cash ISA savers plan to invest an average of £2,737 before the end of this tax year – just 49 per cent of the full allowance. By not using the full allowance they are potentially missing out on £822 million in tax free interest. 

The savviest savers can be found in London, with a third (33 per cent) using their full allowance this tax year, compared to just 13 per cent in Yorkshire & Humber and 17 per cent in the East of England.  

Men are also better tax-free savers than women putting away on average £3,031 compared to the £2,423 saved by women on average. Twenty-five per cent of male savers plan to save the full £5,640 allowance, compared with 19 per cent of women. 

However, despite saving into a Cash ISA just over a quarter (26 per cent) correctly identified the allowance for the tax year ending on 05 April 2013 (£5,640), with only 17 per cent aware of the increase to the allowance for the 2013/2014 tax year (£5,760).

Henk Van Hulle, Head of Savings at Post Office, said: “Our research identifies a Cash ISA black hole with many people failing to take advantage of the full allowance. ISAs are an excellent way of boosting your savings in a tax-efficient way.  While it is encouraging to see a number of people fully using this tax-free opportunity, a significant number of people are losing out. 

“By doing some research people will be in a position to judge the best rates and their long term value, and the ones that will make their savings work as hard as possible for them. Whether investing a lump sum or a little money every month, it all helps people’s hard earned cash go that extra bit further while avoiding tax on savings returns.”

Post Office’s Premier Cash ISA can be opened in branch, by phone or by returning the application form which can be found online at postoffice.co.uk/savings.