ISA allowance
The latest figures show inflation is continuing to rise. Savers need to seek out the best place for their money. Still, millions are shunning the ISAs this tax year and throwing money down the drain.
The Retail Prices Index, or the measure of inflation that includes mortgage costs and that is most commonly linked to savings and investment products, jumped from 2.40% to 3.70% in January for the second month in a row. We therefore need to be earning higher returns on our savings to prevent rising prices from eroding the true value of our money.
A basic rate taxpayer needs an account paying at least 4.62% or more in order to earn a positive return after tax and inflation is taken into account, while someone in the top-rate band needs an account paying at least 6.17%.
The problem is, with the Bank of England base rate still at its historic low of 0.5%, such returns aren’t easy to achieve.
Cash ISAs do help because, unlike standard savings accounts, the interest you earn isn’t taxed. However, despite the value of this tax-break research from moneysupermarket.com found that 37% of people aren’t planning on using their ISA allowance before the tax year ends on 5 April.