Confusion reigns over cash ISAs
10 February 2011
That is according to NatWest and RBS, which claimed that many would-be savers are still confused about Cash ISAs. In fact, research conducted by the bank suggests that 24 per cent of those who have recently opened a cash ISA are not confident that they understand how the product works.
Among those who do not have an account, 39 per cent wrongly think that opening one would mean they would lose instant access to any funds placed inside it - again highlighting the high levels of confusion that exist around the financial product.
Subsequently, NatWest and RBS are now planning to "demystify" Cash ISAs by providing staff in branches and online who can remove some of the mystery.
Phil Sheehy, head of savings at NatWest and RBS, said: "It's clear that many remain confused or misinformed about Cash ISAs.
"Not having the right information contributes to poor savings habits and may lead to longer term detrimental affects to the would-be savers finances.
"65 per cent of recent ISA purchasers would like to understand more about their options, which is why we are again this year, providing a number of useful guides to simplify ISAs and provide easy to follow assistance."
Anyone considering opening a cash ISA should be aware of the following basics:
• They are allowed to save up to £5,100 each financial year without having to pay any tax on the interest earned.
• However, that figure is only half of a person's total annual ISA allowance (set at £10,200 for the 2010-11 fiscal year), with the remaining amount (£5,100) able to be invested in stocks and shares ISAs.
• There are plenty of easy-access ISAs on the market, meaning you can transfer funds to and from your account immediately without losing your tax benefits. However, taking money out of an account does not entitle you to put anything more than £5,100 in during the current fiscal year.
• Every British adult gets a new ISA allowance each tax year, with the amount often being raised as the government attempts to encourage saving. Last year, the total was raised to £10,200 from just £7,200 the previous year.