53% of people still rely on ISAs to protect interest on their savings

More than half of savers (53%) are still intending to rely on ISAs to protect interest on their “nest egg” from the tax man, new research from Leeds Building Society (LBS) has revealed.

The survey, that spanned nationally, further found that most consumers (66%) choose an ISA over other savings products because they are aware their interest will be tax-free.

LBS reported it has continued to see strong demand for its ISAs, particularly fixed-rate products, despite a marked decline in the tax-free savings market following the introduction of the Personal Savings Allowance (PSA).

Since the PSA was introduced in April 2016, and ruled that the first £1,000 in savings interest earned by basic rate taxpayers is tax-free (£500 for higher rate taxpayers), a benefit which applies to the majority of UK savers.

However LBS found that, of those surveyed, one in four (24%) were unaware of the PSA.

Commenting, LBS director of products Matt Bartle: “We believe ISAs are still important to tax-efficient saving in the longer term - consistent saving in tax-free products can build up a substantial nest egg over time and all the interest on that investment is protected from the taxman.

“While the PSA benefits the majority of savers, it was surprising a significant number of people were either unaware of it or unsure of how it affected them.

“Successive Governments have implemented different measures to incentivise saving - the fact that savings accounts with tax-free status have been around for nearly 30 years acknowledges the importance of this type of product and its value to consumers.”

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