Over a third of savers plan to use cash ISAs to fund retirement

The nationwide survey of 1,000 individuals carried out by Alliance Trust Savings has found that found that although one in three (32 per cent) have more than £50,000 in savings, cash ISAs remain the most popular form of savings, used by nine out of ten (91 per cent) of respondents.

Those living in Northern Ireland, Scotland, Wales and the West Midlands were more likely to hold a cash ISA at 96 per cent, slightly higher than the national average.

This is in stark contrast to stocks and shares ISA where less than a third (29 per cent) of the respondents have one, with help to buy ISAs even less at 5 per cent.

Over a third (36 per cent) admitted to using cash ISAs as a way to save for retirement. This figure rises to almost half (48 per cent) of those living in the north, 44 per cent of those in Yorkshire and Humber and 43 per cent of those in Wales.

A notable area when it comes to savings behaviour is London, where 30 per cent are using cash ISAs for retirement funds, with a similar number (32 per cent) planning to use their cash ISA savings for a deposit on a house, compared to a national average of 13 per cent.

And almost half (47 per cent) of those Londoners surveyed invest regularly into a stocks and shares ISA and are most likely to pay regularly into a Help to Buy ISA, with 13 per cent holding one. There were also likely to have bigger savings pots, with 43 per cent having funds over £50,000.

Sara Wilson, head of platform proposition at Alliance Trust Savings, said: “Although tax free cash ISAs can be a useful pot for short term or emergency funds, those with longer term plans for their money may suffer by missing out on the greater potential for growth that stock market-based investments can provide. Our survey found that ISA holders across the UK are building sizable savings pots, with a third holding more than £50,000. With low interest rates and a rising rate of inflation, cash accounts could actually be losing you money, so those with large cash savings should consider moving at least some of their money into a stocks and shares ISA.

“Transferring money from cash ISAs to stocks and shares ISAs could also be a useful opportunity to consolidate different savings pots. Holding everything in one place could make it easier to see the value of savings and investments, check performance and make changes. You could also save money by using a flat fee provider like Alliance Trust Savings. Unlike popular basis point charging, flat fees do not grow as your investment grows, so for those with larger pots – whether achieved through growth or consolidation - that can add up to big savings over the longer term, leaving more to benefit from future growth.”