ISA savers want simplicity and flexibility

On the tenth anniversary since ISA's launched, there is still some way to go before ISAs become a stable part of the UK savings portfolio, according to a study by Alliance & Leicester Savings.

Just over half (57%) of savers have opened a cash ISA and only a fifth (22%) are holding some of their money in an equity ISA. Among the 43% of savers who do not currently have an ISA, just one in seven (13%) are planning to open one in the next tax year.

The government is considering how to make ISAs more attractive, indicating that there may be changes made to the allowance in April's Budget. In the Alliance & Leicester Savings study only 29% of people correctly identified the Cash ISA limit of £3,600, and 19% thought the limit was still £3,000. Even fewer people were able to correctly identify the limit for Stocks & Shares ISAs as £7,200, indicating that any changes to the allowance should keep them simple and memorable (a third (35%) of ISA savers say this is important).

Reza Attar-Zadeh, Director of Savings and Investments said: "ISAs were introduced by the Government to encourage people to save for the future. While take up of ISAs has been positive over the last decade, there are still a lot of people not using them and many continue to find ISA rules confusing.

"In order to encourage people to save tax efficiently, the message is clear, ISAs must be simple and flexible; simpler ISA limits, the ability to be able to dip in and top up and for two way transfers between Cash and Stocks & Shares ISAs, will all help"

Under current ISA rules, people can deposit funds up to their allowance each tax year and, whilst they can withdraw their funds, the money taken out loses its tax benefit forever. The Alliance & Leicester Savings study found that half of Cash ISA (53%) and Stocks & Shares ISA (51%) savers would like to be able withdraw and top up (up to the maximum limit) without losing their tax-free benefits.

Changes to the ISA system in April 2008 allowed savers to transfer their Cash ISA funds into Stocks & Shares ISA, but not the other way round. The Alliance & Leicester research reveals that a third (32%) of those with Stocks & Shares ISAs and a fifth (22%) of those with Cash ISAs would like to have the ability to easily and simply transfer some or all of their higher risk stock market investments into a Cash ISA, so they can keep their savings safe in times of market volatility.

Reza Attar-Zadeh continues, "Many savers are still not making the most of tax benefits offered by ISAs. Our research found a number of areas where savers would like to see improvements and we would urge the government to consider savers' needs in the upcoming Budget."

Santander's UK savings brands (Abbey, Alliance & Leicester and Bradford & Bingley) have a selection of ISAs to suit every saver's needs.