UK savers urged to take ISA action

Wednesday 6 October 2010, is the six month anniversary of the newly increased cash ISA allowance of £5,100.

However, research from Halifax, the UK's largest ISA provider, reveals that most cash ISA savers who topped up their account in the first half of the year are still not making full use of their entire yearly allowance and could be losing out on £49m of valuable tax-efficient interest if they let the second half of this tax year pass them by.

Halifax, which last week adopted an industry leading stance with the introduction of the Halifax Cash ISA Promise, can reveal that consumers are not taking full advantage of the tax-efficient savings vehicle. New research from the Bank reveals that less than one in three (30%) UK consumers have an ISA.

Russell Galley, managing director of savings at Halifax, says:  "If you have something to save, no matter how large or small an amount, it should be saved in an ISA. There are ISAs to suit every type of saver and we're concerned that so many people are failing to use these valuable savings vehicles to their maximum.

"We're also worried about those savers with an ISA who are not making the most of it either by failing to top it up or languishing in a poor rate when they could transfer for a better return.  At Halifax, we're committed to giving ISA customers a good deal which is why we have launched our ISA Promise that ensures those savers transferring their ISA to us, will receive interest as soon as their transfer application form reaches us.  For too long, savers have been at the mercy of an archaic system."

Cash ISA savers are reluctant to switch as they do not understand the process.

Just 22% of savers have switched an ISA in the past while only a third (31%) of ISA holders know how to correctly switch an ISA.  50% of savers run the risk of losing their ISA allowance by withdrawing their ISA funds in a branch to pay in elsewhere, or by attempting to make the transfer online.  Additionally, ISA savers cite they'll lose out on interest (18%), it's too much hassle (35%) and they do not think it's possible (10%) as reasons for not transferring their ISA.

ISA savers will be disappointed with the new industry guidelines of a 15 day transfer timeframe, as a quarter (24%) of ISA savers think switching between providers happens immediately while nearly half (46%) think a switch takes place within a week.  At least savers moving to Halifax will receive interest from day one of their completed ISA transfer application being received.

The key elements of the Halifax Cash ISA Promise are:

Halifax will pay interest from day one that a customer's completed ISA transfer application form is received.

Halifax cash ISA accounts are available to both new and existing customers.

Halifax cash ISA interest rates will be clearly displayed on Cash ISA statements, online, in branch or over the telephone, from July 2011.

Halifax cash ISA customers will also receive advance notice if any initial reward or fixed rate is due to end. 

Halifax recently launched a new best buy cash ISA paying 2.8% AER/ tax free (variable) for 12 months, available for all customers. This is an easy access account which can be opened online, in branch and by telephone with as little as £1. Qualifying current account customers can earn an even higher rate of 3% AER tax free variable for 12 months with Halifax Rewards.