Last updated: 23/07/2020 | Estimated Reading Time: 3 minutes
Benefits of holding on to your cash ISA
Interest rates are currently at an extremely low point, meaning that many people are questioning whether or not there is any point in keeping their individual savings accounts at all. In this guide we will examine all the positives and negatives of keeping your ISA.
In This Guide:
- Why are so many people getting rid of their ISAs?
- Benefits of keeping your ISA
- Advice on what to do regarding an ISA
Why are so many people getting rid of their ISAs?
Recent research has revealed that over a third of people that currently hold savings accounts are intent on doing away with their ISAs. Around half of the people who were asked said that they were considering doing so because of the low interest rates that are currently being offered. Around 20% of people said that they would be doing it because they had need of the money that they had stored in there. A further 4% said that they were planning on this because they think they can get a better deal elsewhere.
Benefits of keeping your ISA
Even though interest rates have fallen a lot as a result of the Bank of England's base rate being at a record low, there are still a number of reasons why you might want to reconsider getting rid of your ISA. At the moment there are individual savings accounts that pay out up to 2.5% AER. This means that if you were to save the maximum £15,240, you could earn £381 over the course of the full tax year. This is a lot better than the interest rates that you will get on most current accounts.
It is also important to remember that even though interest rates are quite low at this point in time, ISAs are still protected from taxation. This means that you would have to find an account that offered interest of over 4%, generally speaking, in order to gain the same amount of profit from your savings if you are a higher band tax payer or 3% if you pay a lower rate of tax.
Advice on what to do regarding an ISA
It is thought that only about one third of people in the UK are currently in possession on an ISA. This means that there are millions of people out there who do not hold an form of tax free savings account. As a result of this, there are millions of people who are currently missing out on the benefits of earning themselves money in a tax protected way.
If you are one of the people who do not have an ISA, you should seriously think about applying for one. In the event that you find an ISA that returns around 2.5% of interest and you deposited the full allowance, you could find yourself earning £381 in one year, tax free.
If you want to find out if you could be getting a better deal on your ISA, then try comparing them online. Here at Money Expert we offer a free, ISA price comparison tool that allows you to compare a huge range of different ISAs in just a few minutes. Our tool is impartial and costs nothing and it allows you to make an informed decision about which ISA you think is the best suited for you.