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Goodbye savings
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Cash Strapped Brits Withdraw £6 Billion From ISAs
Writes Hazel Cottrell hazel.cottrell@consumerchoices.co.uk
In the last 12 months savers have been forced to withdraw £6 billion from their ISAs to meet the rising costs of living, according to new research from Abbey.
The current economic climate is causing more and more people to fall back on their savings. On average, ISA savers have withdrawn £579 each, which is equivalent to 26% of the average ISA subscription for 2007/2008.
Of people questioned, 31% said that it was everyday costs that had driven them to make withdrawals, with a further 15% specifically citing bills such as mortgage repayments or utility bills as the reason for using their hard earned savings.
Nearly a quarter said their savings were used for an unanticipated cost such as an emergency home repair and 13% had used their money to help friends and family with their finances. However, a significant number (26%) said their ISA money had gone towards a luxury item such as a holiday or car.
Reza Attar-Zadeh, Director of Savings and Investments at Abbey says: “You never know when you’re going to need to fall back on your savings and in this respect dipping into them to meet bills such as gas bills is no bad thing. On the other hand dipping in to your ISA savings could prove costly in the long term. With a Cash ISA allowance of £3,600 per tax year any withdrawals made can not be replaced, so that part of your allowance would be lost forever.”
Chris Eagle, Commercial Manager at Credit Choices says: “As we feel the squeeze of the credit crunch, many of us are being forced to dip into our savings. However, withdrawing money from an ISA is denying yourself the tax benefits associated with it. My advice would be to avoid withdrawing ISA cash if at all possible, instead focusing on reducing your outgoings.”
Approximately 41% of the adult population hold ISAs, which allow savers to invest up to £3,600 in cash or £7,200 in equities each financial year, completely tax-free.
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