As new individual savings accounts (NISAs) launch across the UK, research reveals they are not yet ready to curb the savings crisis.
The consumer attitudes survey by by financial services firm True Potential LLP of over 2,000 people showed that 38 per cent of people don’t intend to use any part of their NISA allowance and just 16 per cent say the launch of NISAs will make them more likely to save, despite the greater flexibility and simplicity.
With the launch of NISAs will come the ability to invest up to £15,000 per tax year in either cash or stocks and shares, or a combination of both. Out of those intending to use a NISA, 44 per cent will invest in cash only and just one in ten are planning to invest the maximum £15,000.
Daniel Harrison, senior partner at True Potential says the research shows an urgent need for more specific savings goals and targets, which ‘are a fundamental part of successful saving.’
Harrison continued: “The clear message from savers is that they are not yet aware of the extra benefits that NISAs will bring, and may well turn to their financial adviser for guidance. NISAs will improve the flexibility and attractiveness of the current ISA system by enabling people to invest more of their money in stocks and shares ISAs, which have consistently delivered inflation-beating returns for savers. In fact, we have urged the government to go further and extend the ISA allowance to £25,000 to make them a more viable alternative to pensions. However, if savers use their NISA allowance to invest in cash alone, their savings will in almost all cases reduce in value due to the poor interest rates offered by high street banks.”
Earl Glasgow, Managing Partner at True Potential Wealth Management added: “At True Potential Wealth Management, we believe that simplicity is key to encouraging more people to save and so we welcome these changes. As well as having the ability to invest more money in products that add value, there is also the need for technology to make saving more a part of everyday life.
“From the 1st July, with True Potential’s new impulseSave® technology, those wishing to max their ISA allowance will be able to do so through their personalised client sites with just one click, while others may choose to simply add to their ISA in smaller amounts whenever it’s convenient. We believe impulseSave® will encourage more investors to take advantage of the tax savings opportunities available to them and help get them connected to their finances.”
NISAs have the potential to be great news however True Potential’s research has shown that there is a clear need for greater awareness. One third of people have never heard of NISAs, while just two in ten respondents are delaying saving in an ISA until NISAs are launched.
Don Wernham, an IFA at Simple Solutions Financial Management commented: “I am not surprised that there is a need for greater awareness. People I have spoken to are aware that things are changing, but generally they are unaware of what it is, and so the government should consider a concerted campaign on savings. There is a clear role for advisers to play here. The problem we have had is that people have been saving in accounts that are not even keeping pace with inflation, and there is no scope for growth. This has led to a lack of enthusiasm in this financial product.
“As the ISA system changes, savers need to get back to basics and seek advice to set them on their way, understand what they are saving for and set their financial goals. I really like the idea of a client logging on to my website and with a few clicks they can add to their investment whenever they like. The easier you make it for people to save the more they will be inclined to make use of their NISA allowance.”
The full findings of the consumer attitudes survey are detailed in the “Tackling the Savings Gap” whitepaper found at http://www.tpllp.com/resource-centre/.