ISA investors miss out on £500m

Cash ISA savers are losing out on £500m in interest by not fully utilising their annual tax-free allowance, Nationwide Building Society has warned.

In this tax year, ending 5 April, UK residents can save up to £5,340 in a cash ISA. There are 12 million cash ISA subscribers across the UK with an average subscription per account of £3,190, meaning there is a shortfall of £2,150.

With the average cash ISA interest rate across the industry at 2.2 per cent, this means savers are losing out on £500m of extra interest.

The building society is encouraging all savers and investors who pay tax to make the most of their annual ISA allowance. Not everyone has an ISA and many others do not necessarily use their full allowance.

"ISAs are an absolutely great thing. For savers, they're fantastic because you get all of the interest you earn on your savings account. On most savings accounts, you have to pay tax on the interest, but you get to keep it all in an ISA," said Richard Marriott, head of savings at Nationwide.

"Our research shows that savers are losing out on more than half a billion pounds of interest per year - that's an enormous amount of money and it works out at £50 per person. People should really maximise the amount they save in an ISA if they can. You should also remember that each ISA limit is an annual limit; if you don't use it, you lose it."

The research follows findings from The Share Centre that revealed almost half of investors don’t plan to use their full ISA allowance for the tax year. Of those who aren’t going to use it, 89 per cent say it’s because they don’t have the cash.