Back to January 2019

ISAs still valued, majority of savers tell Leeds Building Society but 1 in 4 unaware of Personal Savings Allowance

More than half of savers (53%) still intend to rely on ISAs to protect interest on their nest egg from the tax man, according to new research by Leeds Building Society.

The national survey§ also found most people (66%) chose an ISA because they knew their interest would be tax-free.

The Society has continued to see strong demand for its ISAs, particularly fixed rate products, despite a marked decline in the tax-free savings market following the introduction of the Personal Savings Allowance (PSA).

Since the PSA came into force in April 2016 the first £1,000 in savings interest earned by basic rate taxpayers is tax-free (£500 for higher rate taxpayers), a benefit which applies to the majority of UK savers.

However, one in four of those surveyed (24%) was unaware of the PSA.

“We carried out this national research to find out what savers thought about tax-free saving and better understand what type of products they were seeking,” said Matt Bartle, Leeds Building Society’s Director of Products.

“We believe ISAs are still important to tax-efficient saving in the longer term - consistent saving in tax-free products can build up a substantial nest egg over time and all the interest on that investment is protected from the taxman.

“While the PSA benefits the majority of savers, it was surprising a significant number of people were either unaware of it or unsure of how it affected them.

“Successive Governments have implemented different measures to incentivise saving - the fact that savings accounts with tax-free status have been around for nearly 30 years acknowledges the importance of this type of product and its value to consumers.”

The Society has refreshed its ISA range for the New Year and offers a choice of variable and fixed rate products, available across different channels including branch and online.

Highlights include:

  • 80% Two Year Fixed Rate ISA, which is market-leading on the high street
  • 38% Limited Issue Online Access ISA

The maximum investment for the current tax year (2018/2019) is £20,000, less any amount invested in a Stocks and Shares ISA in the same tax year.

Ends

Notes to Editors

§A survey, which was undertaken in November 2018 sought the views of 729 people across the UK.

Tax-free means that interest payable is exempt from income tax.

*AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and added each year.

Key features

Two Year Fixed Rate ISA (Issue 111)

  • Annual fixed rate of 1.80% tax-freepa/AER*
  • Fixed end date of 28 February 2021
  • Withdrawals/transfers are permitted subject to 150 days’ loss of interest
  • Interest is paid annually on 28 February (commencing 28 February 2020) and on maturity (28 February 2021)
  • Interest can be credited to the account, transferred or paid to another account held with the Society
  • Minimum opening balance £100
  • Deposits can be made up to and including 28 February 2019
  • Maximum investment is £20,000 in 2018/19, plus previous years’ ISA subscriptions
  • Can be opened online, in branch or by post
  • Can be operated in branch or by post

Limited Issue Online Access ISA (Issue 9)

  • Variable rate of 1.38% tax-freepa/AER*
  • Interest is paid on maturity (1 March 2020)
  • Interest can be credited to the account, transferred or paid to another account held with the Society
  • Minimum balance £1,000
  • Maximum balance £250,000 including accrued interest
  • Maximum deposit in the 2018/2019 tax year is £20,000
  • Transfers in of previous years’ subscriptions permitted while the product remains open
  • Transfers in from Stocks and Shares ISAs permitted
  • Unlimited withdrawals permitted without notice or loss of interest
  • Limited issue and can be closed for further deposits on minimum of 30 days’ notice
  • Can be opened and operated online only

Leeds Building Society was named Best Building Society Savings Provider in the Moneyfacts Awards for 2018, having also won this title in 2016 and 2017.

Leeds Building Society operates throughout the UK and in Gibraltar and has assets of £19.5bn at 30 June (£17.3bn at 30 June 2017). The Society’s head office has been based in the centre of Leeds since 1886.