June 15, 2021

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ISA savers invest in cash accounts despite low interest rates

IT’S A decisions appear to have been imposed on savers recently as according to Hargreaves Lansdown (HL) HMRC data analysis, coronavirus sparked a “last minute” ISA rush. Upon examining the details, it emerged that cash ISAs remain popular with savers, even in an environment of low interest rates.

“This, too, was just the beginning, as the pandemic gave people the time, money and enthusiasm to invest which saw a huge rise in equities and equity ISAs. Next year’s figures will show another big increase.

“2019/20 was a huge year for lifetime ISAs, which more than doubled from the previous year. Every time a new ISA is launched, we see the numbers increase as people become familiar with them, and in its second year, LISA has exploded. Next year we expect these figures to rise again as people who have made block savings have invested their money in LISA to help meet their ownership and retirement goals. “

Sarah went on to look at the cash ISAs that have proved popular despite their limited benefits in the current market: “Despite a lackluster cash ISA season, the number of cash ISAs also increased from the previous year: almost £ 50 billion was saved in cash ISAs .. They are by far the most common house for our money and made up 75% of all the ISAs we paid during the year.

“Savers are realizing that despite the tax-free savings allowance, there are still very good reasons to open a cash ISA. For a base rate taxpayer with modest cash on hand, you won’t save any tax today – the key is what you could save later as your savings build up, especially if interest rates rise, shift tax bands or the savings allowance is cut.

“However, although liquidity continues to dominate, the run into ISA stocks and shares at the end of the year can be seen in the numbers. For 14 of the past 15 years, cash ISAs have made up a larger percentage of new ISAs than we saw in 2019/20. “

While many experts have welcomed the fact that savers are contributing to ISAs in general, some have warned that savers could lose by not using stocks and equity accounts.

It should be remembered that the returns on investment in the markets are not guaranteed, but in the long term, sensitive investments can generate profits far beyond what could be obtained from current interest rates.

Myron Jobson, a personal finance activist at Interactive Investor, commented: “The figures show that cash ISAs remain a favorite of British savers.

“Despite the low rates offered, four times more people opened or contributed to a cash ISA in fiscal year 2019-20 than the previous fiscal year’s equivalent (1.2 million versus 300,000).

“However, while the coronavirus crisis has highlighted the importance of having cash savings for a rainy day, long-term savers should be careful not to hold more than necessary in low-interest accounts because they can be eroded by inflation.

“Rock-bottom savings rates also provide the impetus to invest.

“Investing can be volatile on a daily basis and while the potential for higher returns from the stock market comes with inevitable risks, taking a long-term view means you can smooth out some of these ups and downs while benefiting from the long-term potential that comes from this approach. “

Author:
This post originally appeared on Daily Express :: Financial Feed

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