ISAs causing confusion for recent purchasers

With the end of the current tax year only weeks away, research from NatWest and RBS reveals that many would-be savers remain confused about cash ISAs, the choices available and the tax benefits of putting money into these accounts.

Almost two thirds (64%) of GB adults still do not have a cash ISA.

Since the start of the current tax-year in April 2010, only 16% of UK adults have opened a cash ISA.

Of those who haven't, 39% say the reason for this is because they require instant access to their funds.

These figures suggests there is a large number of people still not taking advantage of their tax-free allowance and demonstrates a lack of understanding of the basic range of instant access cash ISAs available.

Of those who have taken out a cash ISA in this tax year, 24% are not confident they understand the tax-efficiency of the product.

The research also reveals that many recent ISA purchasers in the UK can't explain the basics about ISA limits. Eight out of ten do not know the ISA limit for the current tax-year, and the news that cash ISA limits will increase for the new tax-year, has largely passed them by, with less than a quarter (23%) expecting limits to increase in April. Additionally, around two-thirds (65%) of recent ISA purchasers still don't know exactly when the tax-year ends and the new one begins.

This year NatWest and RBS are aiming to demystify ISAs for savers, by providing free sources of help, with staff available in every branch to provide expert knowledge, online and in-branch ISA guides and tax-year end countdown clock, to provide simplistic ways to ensure UK adults get the best out of their tax-free savings and recognise this readily available benefit. Phil Sheehy, Head of NatWest and RBS Savings, explains:

"It's clear that many remain confused or misinformed about cash ISAs. Not having the right information contributes to poor savings habits and may lead to longer term detrimental affects to the would-be savers finances. 65% of recent ISA purchasers would like to understand more about their options, which is why we are again this year, providing a number of useful guides to simplify ISAs and provide easy to follow assistance. 

"Our research tells us that three out of four people who have taken out an ISA this tax year would like to be offered a choice between instant access and fixed rate ISA from their provider, with 81% of instant access ISA holders not withdrawing any funds since last April. This is why this year we are introducing a suite of fixed rate ISAs."

Fionnuala Earley, UK Consumer Economist at NatWest said: "As fiscal austerity measures begin to bite, it makes even more sense to plan finances carefully and take advantage of any schemes that help protect or enhance savings and investments. Three quarters of a million more people will face the 40% tax rate from April but by making sure you make full use of tax-free ISA allowance every year, you can make the most of your savings and avoid this higher tax rate.  The tax-free ISA threshold increases this year and so should be grabbed firmly with both hands."