Qualified advisers answering your
Financial Questions
call 0800 092 1245

Isa’s suffer first ever fall in Savings

For the first time in their 14 year history, Isa’s have experienced a fall in their savings value, as low interest rates, rising inflation, and a lack of trust deter savers.

Cash Isa’s are tax-free savings accounts with an annual investment limit and since their introduction in 1999 have grown strongly in line with an expanding savings culture across the UK.

However more recently a variety of factors have meant that savers are beginning to turn their backs on Isa’s. Figures from HMRC show that over the course of the last year the amount of new money being invested in Isa’s fell by £200m.

The first reason why more people are choosing to ignore Isa’s is the low interest rates they offer. Interest rates have plummeted over the course of the last two years, with research from Moneyfacts highlighting that returns had fallen by 70pc over this period. The main reason for this is that competition between lenders has capitulated due to lack of need to attract savers’ money. The Governments Funding for Lending Scheme has been earmarked as the main culprit for this, as banks and building societies use the scheme to attract new customers by offering reduced rates on personal and business loans.

As well as this, rising inflation is having a serious impact on our ability to save money. Typically wages are rising very slowly or remaining stagnant, while the costs of food, household bills, clothing and fuel continue to rise aggressively. A recent drop in the price of diesel and petrol is one exception, but this will do little to affect the overall picture.

What this means is that the average would-be-saver has less and less disposable income to commit to an Isa on a regular basis, and eventually this completely restricts some people’s ability to save.

Kevin Mountford, Head of Savings at, said: “Many households continue to feel the pressure of inflation: people’s salaries are not increasing by much and they have seen a big jump in their outgoings, particularly the costs of fuel and food”.

The final main contributing factor is the fact that people are losing trust in high street banks and some building societies. Recent episodes such as the financial crisis in Cyprus, as well as others, have seen savers lose out as their money is used as collateral and their accounts raided. While the major players in the UK are not in any immediate danger of following suit, you don’t have to have the best memory to think back to the Northern Rock crisis in 2007/08 when the bank was nationalised and customers where in major danger of losing their savings.

While the outlook is bleak, it is worth noting that neither low interest rates nor a lack of trust should really deter you from using an Isa as a savings vehicle. Instead you should do some research to ensure that you are getting the best savings rate possible and be sure that, after that rate expires (usually after the initial 12 months), you move your money to a new provider.

Another option is to invest in stocks and shares. There are a wide variety of stocks and shares Isa’s available on the market, and traditionally this type of account will provide higher returns than that of cash over longer periods.

If you have any questions about your savings and feel we can help, please contact one of our advisors and we will address your question and respond in under 60 minutes.

Share this..

Related stories

Financial Guides

Financial Calculators

Our useful calculators can help you get your finances in order:

Latest News


Helpful new tax year facts that could affect you and your money

Blog | Seven helpful new 2016/2017 tax year facts that could affect you and your money. Our recent online blog shares a brief outline on how to stay up to date.

Read more

Useful Links

Popular Searches

Please Enter More Details

Enter More Details