Paragon Bank has urged savers to ensure they are making the most of tax-free savings as figures show that the number of ISA openings has halved this year.
According to data analysed by Paragon, British savers opened a total of 932,000 new ISAs between February and May 2019. During the same period in 2020, only 490,997 ISA applications were processed, a 47% decrease year-on-year.
This slump in ISA activity doesn’t stop at account openings, as the total growth of ISA account balances is down 32% on last year.
This is despite savers saving more money during lockdown, with a staggering £22.6 billion stashed into non-ISA easy access saving accounts between February and May 2020, an increase of £15.8 billion compared with the same period in 2019.
However, some product types are performing better than the market average and have seen success this year. While fixed rate and easy access ISA openings were down by 36% and 42% respectively, the take-up of notice ISAs has grown rapidly.
Certain financial providers, including Paragon Bank, are also bucking the trend and have seen a successful ISA season. Paragon Bank saw a 65% increase in ISA account openings between February and May 2020, compared to the same period in 2019, following the introduction of a range of new product features tailored towards supporting customers make the most of their ISA allowances.
This included the launch of the ISA Wallet, a feature that allows savers to spread their £20,000 annual ISA allowance across multiple Cash ISAs with Paragon. The provider also introduced the Flexible ISA feature, which allows savers to replace funds withdrawn from their ISAs without it impacting their tax-free entitlement.
Derek Sprawling, Savings Director at Paragon Bank, said: “We know that the current savings landscape is driving up levels of inertia, and there is less of an incentive for savers to look for the best deal and move their money around.
“Even in the current market, receiving tax-free interest on savings is invaluable now and in the future. We would urge savers to look at ways they can maximise the return on their ISA allowance.
“It’s also the responsibility of financial providers to support people by making sure ISAs are as straightforward and flexible as possible. Introducing features on accounts that will allow people to find a way round some of the traditional limitations on ISAs, for example the limit on account openings per tax year, is one of the ways providers can support their customers.”
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