Cash ISAs: Have they had their day?
Back in May this year, the Daily Mail ran the headline “Savers ditch Cash ISAs in their droves”.
The article that followed looked at what you could earn from the best Cash ISA accounts, compared with the best taxed savings accounts, and not one ISA came out on top.
But the most startling figure quoted was the drop in savers putting money into Cash ISAs: between February and May, savers added £766 million to their ISA accounts – which may sound impressive, until you realise that in the same period in 2016, a massive £4.3 billion was deposited.
That’s a huge 82% plummet – and it’s primarily down to the introduction of the Personal Savings Allowance in 2016, which lets savers earn up to £1000 interest tax-free from any savings account, opening up all sorts of other options for savers.
Six months on, and in spite of the recent interest rate rise savers are still no better off (as ever, the High Street banks and building societies passed on the 0.25% increase to borrowers immediately, while savers are still waiting). But what about the Cash ISA?
Certainly the ISA is still a very attractive long-term tax-free shelter. But while Cash ISA rates have recently edged up slightly, to a whisker over 1.16%, they’re still way behind inflation at 2.8%. And many savers have now realised, through websites such as In the Know, that there are much more attractive options available with all the tax-free benefits of the ISA wrapper.
So how long can the Cash ISA carry on? Who knows…
In the Know is a specialist ISA review website that uses independent regulated ISA experts to review the options available to savers. To find out more, visit www.intheknow.org.uk.