Savers shy away from Isas

Poor rates and more-generous allowances due in July have seen a drop in money stashed in individual savings accounts, the British Bankers’ Association said today.

Over the three months from March to May — the traditional savings season — total Isa savings were £5.3 billion, down by more than a third from the same period in 2013 when the figure was £9 billion.

The Chancellor’s Budget announcement in March that Isa limits — the amount savers can stash in the tax-free accounts — will climb to £15,000 at the start of July, deterred many from opening an Isa for the 2014-15 tax year before then.Record low savings rates have also put people off.

Andrew Hagger of Moneycomms said: “A lot of people have been holding off in anticipation of the new Isa launch in July but the rock-bottom rates haven’t helped.”

The average cash Isa interest rate is just 1.58%. A year ago it was 1.74%.

This month alone, NatWest, Santander and Ecology building society have cut rates on Isas.

“People have also been looking at alternative homes for their savings, such as peer-to-peer platforms and a number of popular retail bonds,” added Hagger.