More Brits to shun ISA allowance

The full impact of the financial crisis on consumer savings was revealed today (23 February) when new research confirmed 13 per cent more people will forego their ISA allowance compared to last year.

The Co-operative annual ISA Intentions Report shows that 73 per cent - almost three in four - of those yet to invest in an ISA during the current tax year, do not plan to use any of their allowance before the deadline runs out on 5 April, up from 60 per cent in 2008.

And despite interest rates being at historic lows, eight in 10 (84 per cent) of those who do intend to invest into an ISA plan to use a cash scheme over stocks and shares.

Zack Hocking, Head of Investments, said: "These figures are concerning. Not only do they confirm that many people intend to let their ISA allowance fall by the wayside, reluctance exists to invest in the stock market at a point when many industry experts are saying it could be a great time for investors with a longer-term horizon."

"Once the deadline passes, that's it, the allowance is lost forever and people should not be put off saving despite uncertainty in the economy or the stock markets. If in doubt they should consider taking financial advice from an expert to ensure they fully understand the merits of continuing to save."

The findings also show that the recent turmoil in financial services is impacting on the way consumers choose where to place their savings. Six in 10 (62 per cent) of those that will invest between now and 5 April will use trust as a means of selecting their ISA provider.

Zack Hocking, adds: "Investors are now clearly reluctant to put their money into organisations that have previously been reckless with their savings. They want to deal with providers that they can trust to be responsible with their money."

Every tax year, anyone over the age of 16 is given an ISA 'allowance' allowing them to save up to £7,200 without paying tax on interest earned.

Investors can choose to pay up to £3,600 into a cash ISA, or the whole amount into stocks and shares. From now until the end of the tax year there is traditionally an ISA ‘rush' as investors seek to use their allowance before the end of the tax year.

Stocks and share ISAs through The Co-operative Investments, and a cash ISA through The Co-operative Bank. Amongst the unit trusts available to ISA investors through The Co-operative Investments are; the Sustainable Leaders Trust; the UK Growth Trust and UK Income with Growth Trust.

The Co-operative Bank has already experienced a ‘flight to safety' with a 40 per cent increase in retail savings during 2008.