20 March 2017 10:01:55
|New survey sees alarming decline in Brits saving habits|
As inflation creeps steadily upwards, as a result of the depreciation in the pound and increased business costs, many savers are shunning ISAs, according to a new survey by True Prudential.
The alarming figures, based on a survey of 2000 UK adults, found that only around 30% of people had contributed to their ISA in the last tax year (down by around a third from the previous year) and those that did contribute were making ever smaller deposits.
The survey pointed to two main catalysts for the decline in ISA savings:
1. Most cash ISAs (which account for around 80% of the market) are paying considerably less than the rate of inflation, hampered from offering better interest rates by record low BoE rates & Government Bond returns. As a result, many people are using the money which they might otherwise have saved, to prop up their standard of living in the face of increasing costs.
2. Changes to tax for non-ISA savings, which enable people to save up to £1,000 tax-free outside of a traditional ISA, have led some people to look for better savings rates across all savings products.
Although the figures help shed light on the strength of a post-Brexit economy, they will not make welcome reading for the government.
Lower levels of personal savings mean individuals have a reduced capacity to absorb financial shocks, just when the UK is entering a period of prolonged uncertainty. Indeed, Phil Hammond may have had one eye on these figures when he announced the introduction of a new generous National Savings and Investments savings bond (paying 2.2% interest) in the budget.
Of course, savers can get better returns through Stocks & Shares ISAs, which have delivered good returns over the last year, as the FTSE 100 marched ever upwards. However, these are not guaranteed returns, and many will worry that 'what goes up, must come down'.
Unfortunately, savers are now forced to pick between a number of unattractive solutions. Nevertheless, some savings are clearly better than none, and even with doggedly low returns, most people would be well advised to make some provision for a rainy (or less sunny) day.