Savers raid ISAs to cover increase in living costs

06 August 2008

£6bn withdrawn from Isa savings accounts in past 12 months

New research has shown that savers have withdrawn £6bn from their individual savings accounts (ISAs) over the course of the past 12 months as they struggle to meet the ever-increasing cost of living.

According to figures from Abbey, one of the main UK banks, the average ISA saver has withdrawn £579 in the past year from their ISA savings accounts. This equates to 26% of the 2006-2007 average ISA balance of £2,200.

The research showed that 31% of ISA savers had to raid their ISAs to meet increased living costs while 15% put the blame on more specific outgoings such as increased mortgage repayments and utility bills.

Over a quarter of the 1,000 customers who took part in the survey had resorted to digging into their ISA savings to cover the cost of holidays or buying a car and 8% said they had used their tax-free savings to fund a high street shopping trip.

Meanwhile, 13% said they used their ISA funds to help friends and families struggling with money and almost a quarter had to dip into their accounts to pay for unexpected costs such as emergency home repairs.

Reza Attar-Zadeh, director of savings and investments at Abbey, sent a warning to savers about the true long-term cost of withdrawing ISA funds.

“Any withdrawals made can not be replaced, so that part of your allowance would be lost forever,” he said.

“If you’re saving towards a goal such as a home deposit or looking to maximise the amount of cash you have put away for retirement then the advice must be to try to reduce your outgoings rather that dip into your ISA pot,” he added.

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