Savers missing out on tax-free returns by sticking to just one type of ISA

ALMOST two thirds of consumers only use one type of ISA product to earn interest on their money tax-free, research suggests.

A poll by challenger bank Aldermore found that 62 per cent of people are not choosing to diversify despite a plethora of ISA options, which include cash, stocks and shares and the Innovative Finance ISA.

The analysis, based on more than 2,000 interviews with members of the public, also found only a third have used an ISA product over the past 12 months to save money.

Half of respondents said they don’t believe they don’t have enough money to utilise the tax-free benefits of an ISA.

Read more: A fifth of small firms at risk from lack of savings

Read more: £700bn languishing in savings accounts due to inertia

However, 39 per cent said they still believe that ISAs allow them to get the most out of their money, and 13 per cent plan to use their full ISA allowance of £20,000 by the end of the tax year.

“Even though the environment is tough for savers, our research shows that nearly two fifths of the nation believe ISAs help them make the most out of their hard-earned cash,” Ewan Edwards, head of savings, at Aldermore, said.

“Although this is positive, it is evident that there is still a lack of understanding around the importance of ISAs and the benefits this savings product provides.”

Read more: Savers focusing too much on cash ISAs