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15 May 2013

ISA Savings Drop In 2012

Savings into UK individual savings accounts (ISAs) are falling for the first time since they were launched, according to new data from accountancy firm UHY Hacker Young.

A recent report from the firm showed that the amount of new subscriptions into ISAs in 2011/2012 went down to £53.5 billion, compared with £53.7 billion in 2010/2011. This drop is mostly due to a fall in the amount of new money invested in cash ISAs to £37.7 billion, down from £38.2 billion in the previous year.

This could be attributed to the lowest savings rates ever recorded, which may have put investors off, the analysis from UHY Hacker Young revealed. Last year, the average interest for cash ISAs was 2.8%, much lower than the average rate of 5.1% that was available in 2008.

The reason behind low interest rates on ISAs lies in the series of initiatives implemented by the Bank of England in an attempt to encourage lending to businesses, such as the wave of quantitative easing in January 2009, which ultimately affected the availability of attractive rates to investors and, consequently, the amount of money saved in ISAs.

Another move by the government taken last year - the implementation of the Funding for Lending Scheme - is also believed to have influenced the amount of money in ISAs, as it has contributed to keeping interest rates low, the Daily Telegraph reported.

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