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ISA Inertia? You’re not alone

Posted: 31st March 2017

• 43 per cent of people surveyed do not currently have any type of ISA, and have no intention of opening one before the April 5th deadline
• 95 per cent of people don’t know the annual ISA allowance for the 2017/18 tax year
• 64 per cent are concerned about the impact of inflation on their savings, but only 15 per cent have a strategy in place to do something about it

ISAs have been around since 1999, and despite increasing levels of awareness and understanding, particularly for cash ISAs, there are still numerous reasons why millions of savers are failing to take advantage of this valuable tax-break, according to independent research commissioned by Barclays.

Despite tax year end looming on April 5th, 43 per cent of Scots surveyed do not currently have any type of ISA, and have no intention of opening one before the deadline.

According to the research, of the 49 per cent of Scots who don’t currently have or intend to open a cash ISA, four in 10 (43 per cent) said that it was because they didn’t have enough disposable income. 16 per cent said they had other financial commitments while the same number of respondents said they simply didn’t understand them.

Sue Hayes, Managing Director Community and Premier Banking at Barclays, said: “In the current low interest rate environment, we appreciate that it is not always easy for people to grow their nest egg. However, at Barclays we’re keen to encourage a nation of savers and investors, and to ensure that everyone is prepared for the financial impact of life’s ups and downs.

“The increase in the annual ISA allowance to £20,000 for the 2017/18 tax year is a great opportunity for people looking to shelter even more of their savings from tax, but with only 11 per cent correctly able to identify the increase in the allowance, that leaves a number of savers who could be putting themselves at a disadvantage. With a little research, you could uncover savings opportunities that make a real difference.”

Confusion is greater when it comes to investment ISAs, also known as stocks and shares ISAs. Of the 79 per cent of Scots who don’t currently have or intend to open an investment ISA, over a third (35 per cent) don’t feel they have enough disposable income to open one, 32 per cent don’t understand them, one in five (23 per cent) feel they are too risky, and 15 per cent wouldn’t know what to invest in.

On top of that, 45 per cent of Scots that don’t have an investment ISA said they didn’t feel that investment ISAs were aimed at people like them – higher than the UK average of 37 per cent. Of those, four fifths (81 per cent) said that it was because they weren’t wealthy enough, and nearly a fifth (17 per cent) said that it was because they were the wrong age. When asked about the minimum amount they would need in order to open an investment ISA, the average response was just under £2,600, with 14 per cent saying they would require at least £5,000.

With UK inflation one the rise, 64 per cent of Scottish respondents claimed they were concerned about the impact inflation would have on their savings. However, only 15 per cent felt they had a strategy in place to do something about it.

Clare Francis, Barclays Savings and Investments Director, said: “With the Bank of England base rate at a record low, and inflation at its highest rate for more than three years, it’s more important than ever that people stay in control of their money and plan ahead. One strategy to combat inflation is to consider whether an investment ISA could be right for you, as stock market investments tend to outperform cash savings over the longer term. You’d be surprised how easy it is to open an investment ISA, and even if you can only invest a small amount each month, you can still build up a sizeable, balanced portfolio over time, the returns on which are shielded from tax.

“However, there are no guarantees because stock market-linked investments can fall as well as rise, so it’s important to first make sure you’re comfortable with the risks. Barclays customers can now open an investment ISA through online banking, as part of the bank’s new direct investing service.”

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