Despite being introduced nearly a year ago, only 17% of UK adults have started or increased the amount they save using a personal savings account (PSA), according to research by the Nottingham Building Society
It shows that just 52% are aware of the benefit, which came into effect in April 2016, and allows basic-rate taxpayers to earn £1,000 in interest tax-free each year, and £500 for those who pay a higher-rate
However, one age group that have been taking advantage of the initiative are those aged 18-24, with 40% starting or increasing their saving since it was launched.
“Being able to earn up to £1,000 in interest tax-free is a real incentive for saving and it should encourage more people to take advantage of the wide range of accounts available,” Nottingham Building Society, senior product manager, Jonathan Cartlidge, said.
“It is particularly encouraging to see that so many 18 to 24-year-olds are starting to save.
We know the sooner you start to save, the better you will prepare for life’s milestones.
“For example, those who have saved around £250 a month for the past five years would now have a saving pot of over £21,000. Even those who can only commit to saving a small amount each month will see their savings grow.”
This comes as research from Moneyfacts.co.uk, released today, reveals that savers would receive bigger returns maximising their PSA, than they would investing in a new individual savings account (ISA).
It shows that if savers were to invest £20,000 in the best ISA or best non-ISA, neither would bring them returns greater than the lower PSA limit of £500.
Moneyfacts.co.uk finance expert, Rachel Springall, said: “It’s been almost a full year since the government introduced the PSA to enable savers to earn more savings interest tax-free. While this has been an ingenious way to encourage consumers to save, it has also had a big impact on the appeal of ISAs.
“ISAs overall have been struggling to keep up with the more desirable returns that standard savings accounts have on offer, and savers have still had to endure years of low interest rates due to government lending initiatives.
“This has forced savings rates to plummet, making it vital for savers to keep on top of the best buys, and to try not to be too discouraged when it comes to saving for the future.”