Under 25s unmoved by NISAs

cash isa application

JUST 34% of 18 to 24 year olds are aware that the ISA limit has tripled to £15,000 a year today, research from Nationwide suggests.

The building society's poll found that, in contrast, 52% of people aged over 55 knew about the change.

A separate poll by Money Supermarket suggested that even fewer young people, 68% of under 35s, are oblivious to the new tax free allowance.

Young people, are being fundamentally put off investing in stocks and shares ISAs because of the investment jargon that clouds the product's offering and makes it difficult to invest.
Mike Kellard, CEO of AXA Wealth

An ISA is a tax free savings account: money in an ISA will not be subject to income tax, in the cash of cash, or capital gains tax (CGT), when the savings are in the form of an investment. As well as the increase in the tax free allowance, NISAs make it easier for savers to move between cash and investment.

Less savings, less stake

Younger savers typically have less cash to move from an old ISA so it's unsurprising that may also have less interest in savings policy in general and this one in particular.

When these changes to ISAs were announced as part of the Budget in March many were quick to point out that increasing the cash ISA limit from £5,760 in 2013-14 to £15,000 in 2014-15 and more in subsequent years would most obviously benefit those with a lot of cash to put away.

At the time, the Institute for Public Policy Research think tank said that, based on saving 20% of disposable income, only those earning £125,000 a year would be able to put away the whole £15,000 limit.

This could lead younger people to conclude that these savings changes don't apply to them.

Having said that, however, there is evidence that many low earners are ready and willing to put more into tax free savings. Three quarters of those that hit the old limit pay tax at basic rate, meaning they earn less than £31,865 a year.

A share of stocks and shares

Younger people are also far less likely to hold stocks and shares investments than older people.

"People, particularly young people, are being fundamentally put off investing in stocks and shares ISAs because of the investment jargon that clouds the product's offering and makes it difficult to invest," the CEO of AXA Wealth, Mike Kellard said earlier this year.

Another aspect of today's change is to break down the difference between cash ISAs and stocks and shares. From today, it's possible to transfer a stocks and shares ISA into cash and to mix the two forms of saving in any proportion.

For example, a saver with a NISA could put £15,000 in cash or they could choose to save £10,000 in cash and £5,000 in stocks and shares.

More on savings

Nationwide found that 23% of the 18 to 24 year olds they polled new about the new powers to transfer between the two, compared to 30% of the over 55s surveyed.

Similarly, 28% of 18 to 24 year olds knew they could save in a combination of investments and cash. That compared with 46% of the over 55s they polled.

In some ways, however, younger people could lose out most by not knowing about NISAs.

Loophole

A loophole means that, at least for this tax year, 16 and 17 year olds can save up to £19,000 tax free.

They qualify for both a Junior ISA (JISA), which has a tax free limit of £4,000 from today, and a cash NISA with that £15,000 limit, so £19,000 altogether.

When a Junior ISA holder turns 18 the account will convert into a adult cash ISA, keeping its tax free protection for as many years as the money is held in any ISA account.


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