(02/04/2009) 10 years on - Is the party over for ISAs?

With just three days to go before consumers will miss out on their 2008-09 tax-free savings window, Compareandsave.com takes a look back and asks why the ISA is so badly neglected after 10 years in the marketplace.

ISAs were first introduced back in 1999 and since then uptake has increased very slowly and for the first time since 2003/4 the number of ISA accounts subscribed to will likely have dropped in the 2008-09 tax year.

1999-2008 - Data from HMRC Statistics (includes Mini-Cash ISAs/Cash ISAs and Maxi ISAs/Stocks and Shares ISAs (where relevant)

Brad King, Managing Director of Compareandsave.com comments: "There is a real feeling within the industry that a huge knowledge gap still exists - ISAs are misunderstood and underused. I believe that as a comparison site we can play a part in educating consumers about the benefits of regular savings habits- we need to engage young people about the benefits of saving and making use of their ISA allowance."

"In the current climate it's more important than ever to look after your savings so that you have something to fall back on in times of hardship. The key advantage of the ISA is that all the interest you earn on the funds in your account is yours to keep, meaning you save up to 40% of your interest from the taxman's hands."

"The thing consumers need to remember is that if they don't use their allowance it will be lost forever so, with only a few days to go until the 5 April, savers should act now."

"In ten years time ISAs may be replaced by a new savings incentive but it is essential that there remains an account where savvy savers can make the most of their nest egg."

A brief history of the ISA

• April 1999: ISAs were first introduced - intended to make tax-free savings simpler and more flexible than they were using a Tessa.
   
• 6 April 1999 - 5 January 2000: Almost 6.7 million ISAs had been opened and £7.7 billion paid into Mini-cash ISAs.
   
• December 2000: The Government announced plans in the pre-budget report to reduce the overall limit to £5,000 (from £7,000), of which £1,000 could be saved as cash.
   
• March 2000: The decision was deferred - according to Melanie Johnson, the Economic Secretary at the time "ISAs have got off to an excellent start" and the deferral "will give what is already a successful scheme a further boost, resulting in even more tax free saving".
   
• April 2008: Government announces ISA allowance will increase to £7,200 overall, with a maximum limit of £3,600 which can be saved as cash. Mini-cash ISA changed to Cash ISA and Maxi ISA changed to Stocks and Shares ISA. New rule introduced so that money from a Cash ISA can be transferred into a Stocks and Shares ISA (without lose of allowance), but not the other way round.

Brad King, Managing Director of Compareandsave.com is available to offer further comment. For further information please contact the team at BOTTLE PR on 01865 882988 or email louisashutie@bottlepr.co.uk or emmabroomhall@bottlepr.co.uk

Notes to Editors

Launched in 2005, compareandsave.com is a leading online credit card marketplace, where consumers can search, compare and select the best credit cards and personal finance products for their needs.

Every year, more than 5 million UK consumers visit compareandsave.com to compare personal finance products.

The free online resource compareandsave.com evaluates hundreds of credit card and savings offers by category, includes the latest best buys on products ranging from credit cards, loans and savings accounts through to broadband. It also provides consumers with the tools to make the best possible financial decision including a loan, savings, mortgage and salary calculators.  

*2008-09 data is based on calculations made using the 2008-09 Nationwide survey data and HMRC figures. The difference between Nationwide survey data from 2007-08 and HMRC figures in 2007-08 was applied to the 2008-09 Nationwide survey data to give an estimated projection for ISA subscriptions in the 2008-09 tax year.

• Figures based on mid-2007 population projections 16+ from the Office of National Statistics = 49,465,000
• According to HMRC data, 70.25% (35,896,751, extrapolated) of Britons didn't add money to an ISA in 07-08.
• According to Nationwide data, 62% (30,668,300, extrapolated) of Britons did not hold an ISA in 07-08
• Difference between the two = 8.25 percentage points.
• Add 8.25 percentage points to Nationwide 08-09 data to get HMRC data 08-09 (estimated).
• Nationwide survey 08-09 found 69% (34,130,850, extrapolated) Britons did not hold an ISA in 08-09.
• Compareandsave.com prediction based on extrapolation of Nationwide data and past HMRC data: 69 + 8.25 = 77.25% (38,211,713) Britons won't have added to an ISA in 08-09 tax year.

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