Savers urged to stick with Isas despite poor rates

The former financial adviser and co-founder of urged customers not to abandon the tax-free savings vehicle as the Bank of England backtracks on its forward guidance policy of tying base rate rises to falling unemployment.

Ms Bowes acknowledged that the traditional Isa rate war “may never come this year”, since high-paying current accounts can offer better interest rates, even after tax is deducted.

However, she argued: “The problem is that if you don’t use your Isa allowance within each tax year, you lose it forever. And while this may not seem to be a great loss right now, it would mean a reduced lump sum available to earn tax-free interest in the future.”

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Ms Bowes also pointed out that those who have saved the maximum cash Isa allowance since 1999 will have built up a nest egg worth £66,000.

This means a basic rate taxpayer could earn an extra £500 in tax-free interest on an Isa compared to a taxable account.

Adviser view

Nick Fitzgerald, head of financial planning at national advisory firm Brewin Dolphin, said: “Isas are just one example of the low-effort strategies that people should implement every year which, over time, can greatly enhance their savings. The end of the tax year is approaching rapidly, and we urge savers to make full use of the reliefs available to them.”