LONDON (Reuters) - Millions of consumers are missing out on the potential to save free of tax, due to “ISA blindness”, a study said on Saturday.
Huge swathes of the population are unaware of the rules governing individual savings accounts (ISAs) -- a tax-efficient vehicle designed to encourage the public to save.
Every year, each individual can invest up to 7,000 pounds within these tax wrappers in a combination of stocks and shares and cash.
People aged 18 and over can put 4,000 pounds into equities and 3,000 in cash per tax year, while those aged 16-18 can put up to 3,000 pounds in a cash ISA.
However, Friends Provident found that only 39 percent of the population knew the investment limit.
Around 42 percent did not know what the acronym “ISA” stood for and 17 percent did not know the advantages of the accounts.
Meanwhile, a quarter of people felt ISAs were too complicated, and more than a fifth admitted to being put off sheltering their savings in the accounts as a result.
Only 6 percent of those questioned said they would use their full ISA allowance by the end of this tax year; 61 percent said they would be unlikely to do so.
Christine Foyster, head of wealth management marketing at Friends Provident, said: ”A significant number of people have a blind spot when it comes to ISAs, and are either confused by the different types of ISA on offer, or not aware of the benefits of investing in one.
“This is surprising given the fact they have been around since 1999.”
The Treasury said late last year that ISAs would become a permanent savings option for investors, securing their future beyond 2010.
It also announced plans to simplify the regime by removing the distinction between maxi and mini ISAs and allow people to transfer funds held in cash into stocks and shares.
The Friends Provident survey of more than 1,500 people was conducted by online research company 72 Point.