A third of Britons risk losing out on up to £20,000 in tax-free savings because they don’t have an ISA (Individual Savings Account), according to the NatWest Savings Index.
The second annual Savings Index, created from a survey of 10,000 UK adults, uncovered widespread confusion among savers about how ISAs work and the overall tax-free allowance.
The study, created to discover the nation’s saving habits, revealed a lack of awareness around different ISA products. While cash ISAs were the most widely known to nearly three quarters (73%) of respondents, fewer people knew about stocks and shares ISAs (60%), and just 44% were aware of Lifetime ISAs (LISAs).
The upcoming Spring Statement, due on 26th March, could see the Cash ISA allowance drop from £20,000 to £4,000 per year according to industry reports. While half of survey participants held at least one type of ISA, regional differences were significant, with London exhibiting the highest ownership rate (77%) and Wales the lowest (57%).
According to the Savings Index, the average Briton saves £226.05 per month: a total of £2,712.60 each year. When it comes to emergency funds, respondents had average savings of £4,579 – well under the tax-free limit afforded by an ISA.
Each tax year (6th April to 5th April), people can save up to £20,000 tax-free in a standard ISA, either in one account or spread across several. For Lifetime ISAs, the annual limit is £4,000 per account.
NatWest is urging customers, especially younger adults, to explore ISAs to maximize their savings. Its research reveals that more than a fifth (22%) of 18–24-year-olds are unaware of any ISA products at all.
Knowing where to look for savings advice could impact awareness, with the most popular source being experts like Martin Lewis (23%), followed by banking websites (15%). However, 1 in 6 (17%) 18–24-year-olds seek financial guidance from TikTok, where so-called ‘finfluencers’ have been recently criticised for providing misleading advice.
“Our NatWest Savings Index highlights a widespread lack of understanding of ISAs, meaning many people across the country are missing out on valuable tax-free savings opportunities,” said Mo Watt, Customer Journey Manager at NatWest. “It’s particularly concerning that younger adults, who stand to benefit most from long-term saving, have limited knowledge of how ISAs work and the financial advantages they could offer, with more than a fifth unaware of any ISA product.
“ISAs are an accessible way to grow your savings tax-free, but our research highlights a clear gap in understanding. The banking industry must do more to educate people to make informed financial decisions, ensuring they can take full advantage of savings products available to them.
“To support customers’ understanding, at NatWest we have created an ISA guide, featuring answers to the most common ISA questions and providing simple, accessible information about ISAs and their benefits.”
View the full NatWest Savings Index for more results on the UK’s savings habits, as well as tips and advice around budgeting towards savings goals.
