ISAs allow people to put money aside in a tax efficient manner. Money placed inside an ISA will not face taxes on any profits, interest or dividend income. These incentives are provided by the government who allow consumers to invest up to £20,000 into ISAs in a tax year.
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While putting £20,000 into an ISA may not be possible for many people, it is generally advisable to put in as much as possible to get the best benefit.
Despite this, new analysis has revealed that a large number of people don’t put any amount into their ISAs.
The Nottingham Building Society recently analysed data from over 70,000 of their savers, revealing that just nine percent of customers used up their whole allowance.
On top of this, a more surprising statistic was revealed.
Over two thirds, 61 percent, of savers with an ISA account had saved nothing for the current tax year.
This is concerning for a number of reasons, coronavirus has highlighted the importance of having savings during a tough time and there is less than a week remaining to take advantage of the current allowance.
Jenna McKenzie-day, a savings expert and Senior Product Manager for The Nottingham, commented on these findings: “It’s possible one factor that could have impacted people’s likelihood to save and invest in an ISA is the need for access to funds.
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“However, there are many types of ISA, including easy access, so money isn’t always tied up as some often believe.
“The coronavirus outbreak has for some brought to the forefront the importance of saving.
“Although the situation has also understandably impacted many people’s financial resilience and ability to save money, for those who do still want to invest in their ISAs before the end of the tax year (April 5), there is still time to take advantage of their allowance.
“Most should be able to do this without going into a branch by using online or telephone banking to transfer funds to their savings.”
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While these figures could be unique to just The Nottingham customers, separate research reveals that it may be more widespread than expected.
Mintel, the market research company, recently released a report on Covid-19 and it’s correlation with financial resilience.
According to their findings, people across the UK could struggle with disruptions to income.
The report detailed that three out of ten UK adults have no or low (under £500) savings amounts. Additionally, 11 percent of UK adults have no savings or investments at all. As coronavirus continues to impact incomes it appears that certain generations may be able to weather it better. The Nottingham’s figures revealed that the over-forties are putting away much more than younger generations.
The average ISA balance for people aged between 40 and 49 is £9,650 and older generations are putting away even more than this.
Teenager’s currently have the lowest amount with £2,845 being saved on average for 18 and 19 year olds. People in their thirties have an average of £3,814 saved in ISAs, which is nearly £6,000 less than the middle aged.
Jenna continued to comment on these findings: “Looking at the data, the older you are, the more you are saving which is no surprise, however we were quite surprised at the increase in the average savings balance from those in their thirties to their forties.
“That’s when people seem to wake up to the importance of investing more in their future.
“Those in their forties could also have more to put away for their retirement or whatever savings goal they are working towards so that could be a factor.”
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