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You can find the current article at its original source at https://www.theguardian.com/money/2017/aug/31/popularity-cash-isas-collapses-tax-rule-interest-rates
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| Popularity of cash Isas collapses in space of year | Popularity of cash Isas collapses in space of year |
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| Cash Isa savings accounts have collapsed in popularity, with a £20bn fall in the amount invested in the space of 12 months. | Cash Isa savings accounts have collapsed in popularity, with a £20bn fall in the amount invested in the space of 12 months. |
| A combination of changes to tax rules and continuing low interest rates have been blamed for the 33% decrease in the amounts being invested in cash Isas during the 2016-17 tax year. Revenue & Customs said the total fell to £39.2bn, down from £58.7bn the previous year. | A combination of changes to tax rules and continuing low interest rates have been blamed for the 33% decrease in the amounts being invested in cash Isas during the 2016-17 tax year. Revenue & Customs said the total fell to £39.2bn, down from £58.7bn the previous year. |
| Financial advisers Salisbury House Wealth said savers were “cottoning on to the fact that cash Isas offer very poor value”. Steve Webb, a former pensions minister and now director of policy at insurer Royal London, said the data showed that “the shine has really come off” the accounts. | Financial advisers Salisbury House Wealth said savers were “cottoning on to the fact that cash Isas offer very poor value”. Steve Webb, a former pensions minister and now director of policy at insurer Royal London, said the data showed that “the shine has really come off” the accounts. |
| The figures do not mean people are not putting money away for the future; they are just doing so in different ways. Since April 2016, the first £1,000 of interest that an individual receives from savings is now tax-free if they are a basic-rate taxpayer. For a higher-rate taxpayer the threshold is £500. This is called the personal savings allowance and means most people no longer pay tax on savings interest, a change the banking body UK Finance said recently had reduced the attraction of cash Isas. | The figures do not mean people are not putting money away for the future; they are just doing so in different ways. Since April 2016, the first £1,000 of interest that an individual receives from savings is now tax-free if they are a basic-rate taxpayer. For a higher-rate taxpayer the threshold is £500. This is called the personal savings allowance and means most people no longer pay tax on savings interest, a change the banking body UK Finance said recently had reduced the attraction of cash Isas. |
| Low interest rates are driving many people to put their money in the stock market: the HMRC figures show that investing in stocks and shares Isas hit a record high of £22.3bn in 2016-17, up from £21.1bn the previous year. | Low interest rates are driving many people to put their money in the stock market: the HMRC figures show that investing in stocks and shares Isas hit a record high of £22.3bn in 2016-17, up from £21.1bn the previous year. |
| Danny Cox of the investment firm Hargreaves Lansdown said: “Low interest rates and the new personal savings allowance have precipitated a collapse in cash Isa saving. While understandable, this may prove to be short-sighted, as neither low interest rates nor the personal saving allowance are necessarily a permanent fixture of the financial landscape, though it’s fair to say both do look set to remain in place for the foreseeable future.” | Danny Cox of the investment firm Hargreaves Lansdown said: “Low interest rates and the new personal savings allowance have precipitated a collapse in cash Isa saving. While understandable, this may prove to be short-sighted, as neither low interest rates nor the personal saving allowance are necessarily a permanent fixture of the financial landscape, though it’s fair to say both do look set to remain in place for the foreseeable future.” |
| Salisbury House Wealth said the interest rates offered on cash Isas were lower than inflation, “leaving savers in danger of their investments devaluing over time”. This month the financial data provider Moneyfacts said the average easy access cash Isa paid only 0.62% interest. | Salisbury House Wealth said the interest rates offered on cash Isas were lower than inflation, “leaving savers in danger of their investments devaluing over time”. This month the financial data provider Moneyfacts said the average easy access cash Isa paid only 0.62% interest. |
| The HMRC data also shows that the number of cash Isa accounts opened fell by 1.6m, down from 10.1m in 2015-16 to just under 8.5m. | The HMRC data also shows that the number of cash Isa accounts opened fell by 1.6m, down from 10.1m in 2015-16 to just under 8.5m. |
| The accounts have continued to take a hit in recent months. Last week UK Finance said there was a net outflow of £1bn from cash Isas held by UK high street banks in July. | The accounts have continued to take a hit in recent months. Last week UK Finance said there was a net outflow of £1bn from cash Isas held by UK high street banks in July. |
| Isas were introduced in 1999, replacing the earlier Peps and Tessas. There are three main types: cash, stocks and shares, and innovative finance. More recently, three other types have been launched: junior, help to buy and lifetime. | Isas were introduced in 1999, replacing the earlier Peps and Tessas. There are three main types: cash, stocks and shares, and innovative finance. More recently, three other types have been launched: junior, help to buy and lifetime. |