ISA? That's an Australian boy band, right?
The shocking result of a study by Confused.com reveals how little we know about these tax efficient savings accounts, and that we could be handing over needless tax as a result.
With the end of the tax year rapidly approaching it's important to use our 2010/2011 allowance to protect savings in the tax-free wrapper of an ISA. Yet new research from the price comparison site revealed that 43% of Brit's have never had an Individual Savings Account (ISA) and that 14% didn't know what an ISA was.
In addition to the 5% who believe it's an Aussie boy band, 7% think ISA is text speak for 'I'm So Awesome' and 2% think an ISA is an isotonic sports drink.
When asked how much could be saved into a cash ISA, only one in two respondents correctly knew that the current cash limit was £5,100 per year, with 6% saying there was no limit, 11% believing they could add £500 every month. Just 5% knew the total ISA limit (cash and equity) was £10,200 but thought your salary had to exceed £30,000 a year to qualify. An honest 27% admitted they just didn't have a clue.
Despite having clear goals for saving, including 22% wanting to put finds away for retirement and a further one in five (20%) saving towards a deposit for a house – just 51% of savers have used this year's ISA entitlement.
Chris Griffiths, head of savings at Confused.com, , said: "It's worrying that 14% of Brit's don't know what an ISA is given that they've been around for more than a decade. It's even more of a concern that two fifths of people have never had one and that 51% haven't used this year's allowance.
"An ISA really should be the first port of call for your savings as you can earn interest without it being taxed, giving you a better return and ultimately putting more money in your pocket. Using your allowance each year can be a great way to help you towards your long term savings goals; as your tax free savings pot grows so will the interest you earn.
"Getting an ISA is really straightforward, shop around for the best deal for you and consider managing your account online as these accounts may offer you a higher rate of interest. Remember you only have until 5 April to use your tax free allowance this year."