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Post Office reports a £51 billion cash ISA ‘black hole’

Nearly half (45%) of people in the UK have a cash ISA, but 57% of these do not plan to use the full £5,640 tax-free allowance.

Just over one-fifth (22%) expect to invest the maximum amount and 74% are unsure of the exact allowance for this tax year 2012-13.

The report found that cash ISA savers plan to invest an average of £2,737 before the end of this tax year, just 49% of the full allowance. By not using the full allowance, these savers are potentially missing out on a collective £822 million in tax-free interest.

The savviest savers can be found in London, with 33% using their full allowance this tax year compared with just 13% in Yorkshire & Humber and 17% in the East of England. 

On average, men are better tax-free savers than women, putting away £3,031 compared with the £2,423 saved by women. Around 25% of male savers plan to save the full £5,640 allowance compared with 19% of women.

Henk Van Hulle, head of savings at Post Office, said: “Our research identifies a cash ISA black hole with many people failing to take advantage of the full allowance. ISAs are an excellent way of boosting your savings in a tax-efficient way. 

“While it is encouraging to see a number of people fully using this tax-free opportunity, a significant number of people are losing out.

“By doing some research people will be in a position to judge the best rates and their long term value, and the ones that will make their savings work as hard as possible for them.

“Whether investing a lump sum or a little money every month, it all helps people’s hard-earned cash go that extra bit further while avoiding tax on savings returns.”

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