Consumers could be losing out because some providers have slashed the interest rates paid on new cash Isas, an Isle of Man advisory firm has claimed.
In a note to clients, Edgewater Associates warned: “Check the interest rates you are being paid.
“Providers have been cutting Nisa rates of late and if you have a chart-topping Isa from a few years ago, you could find it is now paying no more than 0.5 per cent.”
|Year||Number of cash Isas subscribed to||Number of stocks and shares Isas subscribed to||Total|
Source: HMRC Individual Savings Account (Isa) Statistics
The post noted that while Isas and Nisas had “long been popular with savers”, figures from Her Majesty’s Revenue & Customs showed consumers had favoured cash Isas since the inception of the accounts in 1999, even though the balance had shifted in 2013/2014.
It said: “What is surprising is the heavy bias towards cash Isas, despite the miserable, often sub-inflation interest rates that have prevailed in recent years.
“While the amount invested in stocks and shares Isas is not much increased from the level in the year Isas were born, cash Isa contributions have more than tripled.”
It added: “However, in 2013/14 the new contributions to cash Isas fell by about 5 per cent and the number of contributors dropped by about 10 per cent. Stocks and shares saw corresponding increases of 12 per cent and 2 per cent.”
At the beginning of the tax year starting 6 April 2014, the limit on the amount that could be subscribed into a combination of an adult stocks and shares Isa and a cash Isa was set at £11,880, providing the amount set into the second Isa did not exceed £5,940.
From 1 July the Nisa, which offers a yearly allowance of £15,000 in cash, stocks and shares or a combination of the two, came into force.
Roy Lupton, director of Kent-based Allied Luptons, said: “The vast majority of people are conscious and savvy enough to know when they are getting pathetic rates of interest.
“But it is sensible for every client to consider having cash within Isas which is accessible.”