ISAs are increasingly taking over from traditional saving products as one in three Britons plan to allocate their entire retirement income in the tax-free wrappers.
However, only one in 10 Brits investing their savings into cash ISAs are actually satisfied with the rates they earn, a new study by MetLife UK revealed.
While 34 per cent of respondents said they will focus on ISAs for their guaranteed retirement income, underpinning a shift in retirement planning, they are widely unaware of the different options available through ISA products, the insurance group warned.
Two third of ISA users only save through cash wrappers and more than half of them are unhappy with the return they get – which, at about 1.75 per cent, is currently just above the inflation rate.
“It is worrying that with so much ISA saving focused on cash ISAs, so few savers are happy with the rates they are earning,” said MetLife’s wealth management director Simon Massey.
“However, it’s understandable than many are nervous about investing their money in a traditional stocks & shares ISA when markets are uncertain.”
The ISA market attracted more than £58bn in contributions last year alone – with the recent pension freedoms prompting at least one fifth of pension savers to invest larger sums into ISAs, according to the study.
The upcoming increase in the ISA investment limit from £15,240 to £20,000 also makes a strong case for the tax-free saving option, Massey said.
“The rise in contribution levels will provide another boost, but there has to be real choice aside from the higher return but riskier stocks and shares ISAs and the low rates of cash ISAs,” he added.