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24 February 2009
The ISA Education Gap
New research by Clerical Medical has identified a general lack of knowledge of ISA's. The leading pensions and investments provider is urging anyone who either already has an ISA or is considering one to visit an Independent Financial Adviser (IFA) to seek advice on how to maximise their tax free savings.
Key Findings
Confusion over Investment products. In spite of it being one of the most popular investment vehicles, over half the population (51%) do not know what the acronym ISA (Individual Savings Account) stands for.
Unaware of tax free savings limits. The research highlighted a general lack of awareness when it came to ISA limits for both cash and equity ISA's. 76% of those surveyed do not know how much they can invest in a tax free equity ISA, 66% underestimated the value and 52% mistook the £7,200 allowance with the £3,600 cash ISA allowance.
Lack of awareness leads to a potential tax free savings waste. Up to £225 bn of potential tax free savings not being utilised in the UK. This potential waste is calculated on the 66% of those surveyed, as a representative of the UK population, underestimating the tax free Equity ISA allowance of £7,200. *
Majority recognise the need for appropriate advice. 84% of people believe they would be better off if they were more financially aware and actively sought the appropriate financial advice from Independent Financial Advisers (IFA's). This includes decisions about mortgages, investments, insurance and pensions. This highlights the need for access to appropriate advice.
Need for advice widely acknowledged. Over half the population (51%) believe that talking to an IFA would benefit their current finances, however, only one sixth (16%) have visited one in the last year.
Clerical Medical will be publishing a quarterly ISA awareness index, to track people's awareness and usage of ISAs as tax free savings vehicles.
John Van Der Wielen, managing director at Clerical Medical said:
"It is crucial to raise the awareness of ISAs among the British public and the important role that they can play in maximising peoples' tax free savings and investments."
"Our research has uncovered a general lack of understanding of common financial terms. It highlights the need for suitable and focused advice when making investment decisions."
Notes to Editor:
Clerical Medical's range of 36 Open Ended Investment Company (OEIC) funds went live on Monday January 19th 2009. The range is also suitable for ISA investment for the first time. The funds form part of Clerical Medical Investment Solutions, announced last year. The range contains managed and single asset class solutions across three risk categories. It includes 18 new funds.
* The UK adult population over 18 according to the office of national statistics based at 47 million.
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