THE NUMBER of ISAs on the savings market has topped the levels seen during the peak of last year’s ISA season, research from Moneyfacts has found.
The Moneyfacts UK Savings Trends Treasury Report revealed that there were 399 ISAs on the market at the ISA season peak in 201, but now there are 415 deals available, with still almost a month to go until the end of the tax year.
Despite this, there is still “room for improvement with ISA rates”, says Moneyfacts, particularly on fixed deals. The average one-year fixed ISA stands at 1.37 per cent, 0.1 per cent less than the average one-year fixed bond at 1.47 per cent.
Moneyfacts noted that the disparity between the fixed returns available from ISAs and bonds is primarily due to competition among the challenger banks who may not offer an ISA.
Activity is rising among longer-term fixed ISAs, with the average rate climbing to 1.62 per cent, but failing to beat the return of 1.89 per cent available outside an ISA wrapper.
Recent research from Hargreaves Lansdown showed UK savers have missed out on at least £188bn in lost interest from low-yielding savings accounts over the past 10 years – the equivalent of £7,101 per household.
The P2P lending industry is hoping these statistics will help set the stage for inflows into the Innovative Finance ISA (IFISA) as the tax year comes to a close.
The platforms are gearing up for their best ISA season yet, with IFISA volumes predicted to soar as investors rush to allocate their tax-free allowance before the end of the fiscal year.
IFISA providers have reported increasing inflows from ISA transfers, as investors turn their backs on low-yielding cash ISAs and volatile stocks and shares ISAs. But the product still faces the challenge of lack of awareness among consumers – a recent survey found that 87 per cent of young adults had never heard of an IFISA.
Read more: Industry readies for bountiful ISA season
“The latest ISA season shows great signs of improvement, with the choice of deals breaking the levels seen during the peak in 2018,” said Rachel Springall, finance expert at Moneyfacts.
“It is encouraging to see providers fully on board with the ISA season this year, with some launching market-leading rates to grab the attention of keen savers.
“Despite the boom in deals, rates generally have not breached levels seen since the introduction of the Personal Savings Allowance (PSA), with its impact still felt almost three years on. However, this shouldn’t create apathy among savers to utilise their ISA allowance, as this has its longer-term benefits. In addition, the market is gradually improving so savers would do well to check their existing accounts.
“Clearly, as the ISA season comes to its peak, savers would do well to move any older ISA pots if they haven’t done so already – but be sure to transfer them and not encash them to keep their tax-free wrapper – as well as studying the top rates before competition fizzles out.”
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