Use It or Lose It: Study Shows 2 in 5 Brits Are Unaware of ISA Deadline

It’s currently ISA season, which takes place from February to the end of the financial year in April, a period in which many British savers will be attempting to use up any remaining ISA allowance before they lose it on 6th April. 

As we approach the final few weeks of the tax year, have you ever wondered just how much Brits really know about ISAs and how confident they are when it comes to utilising them to help grow their savings?

A shocking study from Shepherds Friendly delving into Brits’ knowledge of financial matters found that 2 in 5 of us are unaware of the start date of the new tax year (6th April), and two thirds are unaware that the government offers a 25% bonus on top of savings paid into a lifetime ISA. This lack of knowledge around ISAs could be causing barriers to Brits being able to save money, which has become more important than ever as the cost of living crisis continues to hit households across the country.

A separate study from Shepherds Friendly also found that a whopping 53% of Brits don’t currently have an ISA, with 3 in 5 of those aged 55 and over not having one, making this the least likely generation to do so. This means a large proportion of people in the UK are missing out on reaping the benefits of ISAs, with perhaps the biggest being that they are completely tax-free.

There’s no doubt that the cost of living crisis has had a big effect on people’s personal finances; however, the study found that 1 in 5 people have set up a cash ISA during the cost of living crisis in order to try and get better at saving money. This suggests many Brits are eager to make positive changes when it comes to their personal finances; however, just 1 in 7 Brits is currently able to use all of their yearly ISA saving allowance (£20,000). 

Despite this, having an ISA could be making better savers out of us Brits, with the research showing that those who don’t have an ISA are twice as likely to dip into their savings compared to those that do have an ISA, suggesting ISAs can be beneficial for helping Brits stick to their savings goals.

A holiday abroad is the top priority for money-saving Brits, with over a quarter (26%) revealing they are working towards this saving goal. A rainy day fund (18%) comes in second place. Meanwhile, Brits are cutting down on spending on takeaways in order to save more money, with 46% revealing that they have reduced their spending on this in the past year. Takeaways are followed by new clothing (43%) and socialising with friends (33%).

To achieve their savings goals, the study found that people in the UK are saving an average of 17% of their salary, which was 19% before the cost of living crisis began. Those in Brighton are saving just 9% of their income every month, compared to 11% before the cost of living crisis, the lowest percentage saved per month in the study. On the opposite end of the scale, Glaswegians have seen the biggest drop in monthly savings as a percentage of their salary since the cost of living crisis began, down from 18% to 10%.

When asking Brits how much they have set aside in their savings already, the average amount was revealed to be £20,612, with men having around £6,158 more on average than women. Norwich is the city that has the most saved up in the UK (£31,533 on average), while Glaswegians have the lowest amount in their savings at £6,419. Just 2% of Brits have more than £250,000 saved up, while shockingly, one in seven have nothing at all in their savings.

Below, Derence Lee, chief financial officer at Shepherds Friendly highlights the importance of ISAs for helping you grow your long-term savings:

“Saving money can be a challenge for many of us, even more so in the context of the current financial climate.

“Setting up an ISA can be a great way to encourage you to build your savings, allowing you to save up to £20,000 tax-free each year. There are several different ISA options to choose from depending on your savings goals, including stocks and shares ISAs that allow you to invest in shares, funds, bonds, and other assets without paying capital gains tax, to junior ISAs that help you save for your child’s future.”