23 March 2015

How are we using NISAs?

The 2014 Budget included some welcome news for savers. The existing ISA savings and investment wrapper was re-invented as the new ISA (NISA), with a higher limit and greater flexibility on how much to save or invest within it. The move has given people greater freedom to choose how and where they deposit their money.

A welcome change

For many, the introduction of the new ISA, or NISA (see details below) was a welcome change. At Nationwide, we had been campaigning for some years for the Chancellor to equalise the limits of cash ISAs  and Stocks and Shares ISAs, and make tax-free saving easier and simpler to understand.

The new rules mean savers who prefer the stability of a cash ISA and want quicker access to their money can have the same opportunity for saving tax efficiently as those who prefer the longer-term opportunities for potential growth offered by a Stocks and Shares ISA.

Have people's saving habits changed?

With the new financial year on the horizon, it’s almost a year since the ISA changes were announced and 9 months since the new limits and rules came into play. So are UK savers making the most of them?

Our data suggests that they are. As of 31 January 2015, more than one in ten (15%) savers with a Nationwide cash ISA had already used up their current limit, while 9% had saved between £10,000 and £14,999.

A fifth of savers had put away between £5,000 and £9,999, saving an average of £6,607 - over £600 more than they would have been able to save under the old ISA rules. Overall, almost half of savers had put over £5,000 in their cash ISA with a quarter of the financial year remaining.

NISA usage infographic

Richard Napier, Nationwide’s Divisional Director for Mortgages and Savings, said: ‘We have always encouraged people to save in ISAs and enjoy the tax benefits that accompany them. That is why with cash ISAs now enjoying parity with the Stocks and Shares ISAs and the overall annual allowance increasing to £15,240 in April, more savers will be able to put more away.'

Remember, you’ve got until April 5 to make the most of this year’s tax-free ISA allowance. To find out more about ISAs and how to use them, take a look at our ISA guide.

NISAs in a nutshell

The main benefits of NISA changes, which were launched in July 2014, are:

1. It allows people to save or invest more – The overall limit for the 2014/15 tax year was £15,000, up from £3,480 compared to the previous year and marking the biggest ever annual increase in ISA limits. The amount which can be saved in a cash ISA rocketed from £5,940 to £15,000. For the 2015/16 tax year the limit will rise to £15,240.

2. The full ISA limit can now be used for savings – Previously, the amount people could save in a cash ISA was capped at half of the overall ISA limit and the remainder either had to be used for investing in Stocks and Shares or go unused. But now people can use the full allowance in cash, Stocks and Shares or any combination of the two.

To see last year’s ISA changes in closer detail, take a look at our ISA infographic.

Important information 
Please remember that with investments such as Stocks & Shares ISAs: the value of investments can fall as well as rise which means that you may not get back the amount you originally invested.

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