Low interest rates means savers abandon ISAs

Introduced in 1999, Individual Saving Accounts (ISAs) offer a tax-free savings scheme for up to £3,600 in cash and £7,200 per year in stocks and shares.

ISAs are a very popular form of investment with 11.5 million people investing in the tax free scheme, although as the Banks and Building Societies line up to offer their rates since the Bank of England has reduced rates to heavily, the ISA providers have had to follow suit making them a far less attractive option to cash-strapped consumers.

As there are 7 savers for every one mortgage holder, it seems that the fall of interest rates from 5 percent to its current low of 1% means that savers have really been affected as their investment income has fallen dramatically.

According to the financial comparison site uSwitch.com, the current situation regarding interest rates and tighter disposable incomes has meant that millions of savers are now actively considering to not use their tax free saving allowances in tough times.

Research by uSwitch has found that the average cash ISA saver has £2,200 and in the upcoming financial year, savers are actually set to withdraw £9.5 billion meaning basic rate taxpayers could lose up to £223 in tax relief.

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