Savers flee ISAs as interest rates plummet

| February 17, 2009 | 0 Comments
Savers flee ISAs as interest rates plummet

Over one third of ISA holders are planning to ditch the account because of low interest rates and the need to use their savings to see them through the recession.

A uSwitch.com poll found that 38% of the UK’s 11.5 million ISA holders are planning to withdraw from their ISA.

With the average ISA account holding £2,200, this mass exodus would leave ISA providers around £9.5 billion out of pocket.

Around half of those withdrawing are doing so because of low interest rates; as the Bank of England has slashed the base rate of interest to a record low, ISA providers have followed suit.

“There is no getting away from the fact that savers have been the sacrificial lambs of the plummeting base rate,” said Rumina Hassam, uSwitch.com personal finance expert.

Meanwhile, 18% of ISA holders are cutting their account because they need the extra money.

Price comparison service uSwitch.com said savers should not be hasty in withdrawing money from their ISA because altogether they could end up sacrificing millions of pounds in tax free gains.

Hassam said: “Low rates will not last forever and as soon as the base rate starts to climb again, savings rates will follow suit.”

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