Savers set to stash away £117 billion in cash ISAs this year
Despite ISA rates at near rock bottom levels and inflation eating into household income, 26% more Brits intend to save into a cash ISA this tax year and those who do will save almost £1,000 more than they did last year, according to new research from uSwitch.com.
While the base rate hasn't budged since March 2009 - remaining at 0.5% - cash ISA rates have taken a turn for the worse. However, poor rates have done little to deter savers, with Brits planning to stash away £117 billion tax-free. The average amount people plan to save into a cash ISA is up from £2,784 last year, to £3,723 this tax-year.
With household finances being battered by the rising cost of living and frozen pay, savings are often the first casualty, yet over four in ten (44%) intend to take full advantage of their cash ISA allowance by saving the full £5,640. What is more, savers are already planning to increase their contributions to match next year's new ISA limit, with 39% intending to save the full £5,760. There's also more of an appetite to shop around - 70% of ISA savers have now switched at least once to get a better rate, compared to just 51% last year.
When it comes to attitudes towards ISA saving, four in ten (40%) consumers believe it's important to take advantage of the full cash ISA allowance. As a result, three quarters of Brits (77%) are willing to make sacrifices to max out their ISA allowance, with 5% willing to cut back on household essentials, 10% prepared to sacrifice a holiday and a fifth (20%) happy to cut out daily luxuries. One in four (24%) would forgo a new car or home improvements in order to save the full amount.
Yet while many are willing to make sacrifices, 19 million UK adults are still failing to take full advantage of this tax-free allowance, losing out on £165 billion in tax-free savings.
Michael Ossei, personal finance expert at uSwitch.com, says: "Cash ISA rates have plummeted in recent months and savers are having to make do with the lowest returns in years. Yet despite this, savers will be flocking to cash ISAs in their droves with a 26% increase in the number of savers this year compared to last. And they will be saving more too - tucking away almost £1,000 more this year compared to the last. Whether they will find an attractive home for it remains to be seen - traditionally this is a time when competition in the cash ISA market hots up, but we are nearing the end of February and only a handful of providers have announced increased rates.
"While savers are up against it, it's encouraging to see that more are willing to shop around and switch in order to get the best return. Last year we saw a big difference between the best fixed rate deals versus easy access deals, but not anymore. This year there is little difference between the two and with fixed rate deals offering little more than 2% interest, there is scant incentive or reward for locking cash up in this way.
"With rates just bumping along, it's more important than ever for consumers to find the right ISA or savings plan to suit their needs. Arming yourself with the right information is the first step in winning the best return for your hard-earned cash."