ISA rates: Women hit particularly hard as interest plummets – the ‘cycle’ must be broken

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ISA accounts can come in many forms but one of the most popular types is the cash ISA. HMRC have recently released data on how people are engaging with cash ISAs and analysis from Bowmore Wealth Group revealed that women hold the highest number of all cash ISAs available.

In examining the official statistics from HMRC, Bowmore found that women held 55 percent of all cash ISAs last year.

This is a ratio which hasn’t changed much in recent years, as in each of the last five years women always represented more than half of all cash ISA holders.

Cash ISAs are a common part of many savings plans but they’re unlikely to offer great returns via interest.

This means that women in particular could struggle with their monetary holdings, especially when considering that they’re unlikely to seek further guidance.

Financial assets need to be managed to get the best possible result and as such, various public institutions (including the government) and financial experts urge the public to seek financial advice where they can.

This advice and guidance can help people manage their complex financial assets such as ISAs, pensions and investments.

However, Bowmore detailed that separate research suggests that women are more likely to consult with other women before making a financial decision, if one is made at all.

They detail that this could create a self-reinforcing cycle in which important decisions fall by the wayside.

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Jill Ellicott, a Chartered Financial Planner at Bowmore Financial Planning, which is part of Bowmore Wealth Group, commented on HMRCs figures: “We need to break the cycle of women being over exposed to low returning savings products.”

“Cash ISAs should not be relied on to create wealth long term – in a normal environment, inflation would easily outstrip the interest rates on offer which leads to the value of savings being eroded over time.”

“There is arguably an advice gap here too.

“There is a considerable amount of research out there which suggests women do not think they get the same financial advice as men.”

It should be noted that while seeking professional financial advice can be beneficial it can often be very costly.

For those with limited resources, general savings advice can be sought from the likes of the Money Advice Service and Citizens Advice.

However, even with dedicated research savers may not have much luck at the moment.

The latest “Savings Trends Report” from MoneyFacts detailed that average savings rates across the board have halved since March, which includes rates for ISAs.

Renny Biggins, the Head of Retirement at The Investing and Saving Alliance’s (TISA), commented on the unfortunate reality that savers are facing at the moment, while providing guidance on what can be done to boost long term outlooks: “It is worrying to see that the UK savings rate has halved since the beginning of the COVID-19 lockdown. In these difficult times, it is important to provide some help and guidance for the public on the best places to allocate savings, with particular attention paid to why people are saving and which product will best suit their objectives.

“When a saver is only considering saving money in the short-term, for example, to buy a car or to pay for a holiday, then a low-interest rate may not seem to make any material difference. There are, however, a few easy access accounts available that still pay over 1 percent, so these savers should still shop around to find the best option.

“When saving for retirement purposes, savers may consider putting their money in a pension, as this way they can get the benefit on tax relief at their marginal rate. When looking to buy the first property, a Lifetime ISA (LISA) may be the most appropriate option with the associated Government bonus.

“Before beginning their savings journey, customers should look at their debt position. Whilst it is important to have some ‘rainy day’ savings to meet unexpected costs, it may be better to pay off any debt first. The interest payable on the debt is likely to be more than any savings interest rate. It is also important to check whether any early repayment penalties may be incurred. Depending on the charge level, it may be better to keep hold of the cash and wait until the penalty has expired or becomes negligible. “

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