Government confirms appeal and suitability ISA for modern saving

The quantitative research published by HM Treasury and HMRC supports a number of assertions TISA has made in recent years regarding the ISA’s use for savers in every walk of life.

The ISA’s appeal is largely due to consumers’ familiarity with the scheme, its flexibility, and increased appeal for long-term savings.

ISAs are well known to most consumers; a widely recognised brand for saving. Even amongst those who are not currently saving in ISAs, only 6% claim to have never heard of ISAs and only handful said that ISAs are too complex.

When asked what kind of savings and investments they hold, ISAs are the fourth-most popular after: current accounts (85%), cash deposit savings accounts (58%), and property (43%). In the study, more people report holding ISAs (39%) than pensions (37%).

ISAs are flexible and allow savings as and when savers are able. 25% of respondents in the Government’s survey make multiple payments per year, while just under 20% make a single lump sum each year. 27% have made only one payment when they opened the account.

ISA savings are long-term savings. 60% of ISA holders have never withdrawn the money and over three-quarters (76%) have made either 0 or 1 withdrawal.

While ISA savers have a number of motives for saving, the most common are to accumulate funds in a tax-incentivised wrapper, to have money for a ‘rainy days’ and emergencies and money for no purpose at all. Of those where a specific purpose was given, retirement funds ranked the highest.

The survey reveals that when respondents were asked about the relationship between their ISA and pension savings, 60% are using these vehicles in tandem, while a considerable number, 30%, reported saving in ISAs instead of pensions. (TISA always recommends that consumers contact their financial adviser to determine what will best suit their specific circumstances.)

TISA Director General Tony Vine-Lott said, ‘This survey by the Government is extremely interesting reading. It confirms much of what we have known from anecdotal evidence for years—ISAs are an increasingly popular savings vehicle that really appeal to the consumer. They are well known, allow savings for a multitude of purposes while allowing flexibility that many consumers find useful, and are increasingly fulfilling a long-term savings need.

We anticipate that the utility and benefit of ISAs will spread to an even wider base of savers as the Government’s reforms to the ISA regime take effect from April 2008.’