Research from life and pensions company Friends Provident has revealed that many UK consumers do not take advantage of their annual tax-free savings allowance due to confusion and a lack of in-depth knowledge of the benefits of individual savings accounts.
The survey, which was conducted by online research house 72 Point on behalf of the pensions provider, discovered that 42% of the 1,528 respondents did not know what the initials ISA stood for, while 17% did not know why it was worth investing in one.
Furthermore, only 39% knew the maximum amount they were allowed to invest in a maxi ISA every tax year. A quarter said that they felt ISAs were too complicated, while 22% admitted to being put off investing in an ISA as a result. The 26- to 30-year-old age group was most affected by this, with 27% admitting that their belief that ISAs were complicated prevented from them investing in the product.
In the next tax year, the study revealed that 26% of respondents planned to invest in an ISA while 41% said that they would not.
The findings come after the recent announcement by the Treasury, which unveiled plans to simplify the ISA regime by removing the distinction between maxi and mini ISAs. As a result, consumers can transfer past tax year cash ISAs into stocks and shares ISAs without this affecting their current annual allowance. These reforms are set to come into effect from April 6, 2008.
Christine Foyster, head of wealth management marketing at Friends Provident, said: Our findings show that a significant number of people have a blind spot when it comes to ISAs, and are either confused by the different types of ISA on offer, or not aware of the benefits of investing in one.