ISA Deposits Suffer Unprecedented Fall
Fears have been raised about the sustainability of Britain's economic recovery after new figures showed an unprecedented fall in households' deposits in Individual Savings Accounts.
The amount UK households have stored away in cash ISAs fell in April at the fastest monthly rate since the accounts were introduced in 1999, according to the Bank of England.
Customers' deposits dropped by £2.8bn or 1.2% to £226bn during the month, its statistics showed.
April is usually the strongest month for ISA deposits, since it marks the beginning of the tax year, and hence the earliest opportunity for customers to take advantage of the tax-free shelter within the accounts.
The news is likely to raise eyebrows, given the Chancellor's pledge that his Budget this year would be for "makers, doers and savers".
In fact, despite his announcement in March of a sharp increase in the amount of cash eligible for saving within ISAs from £11,520 to £15,000, UK consumers appear to have reduced their appetite for saving.
In December, Sky News revealed that the overall outflow of savings deposits from all long-term accounts was the greatest and fastest in recent economic history.
According to Simon Ward, economist at Henderson Global Investors, that flow has continued in recent months.
He pointed out that part of the explanation for the fall in ISA savings was a sharp drop in the interest rates paid on such accounts, from 2.84% two years ago to 1.31% this April.
"The lower reward for saving has caused households to shift funds into sight deposits and to spend more or invest in equities etcetera," he said.
"In addition to the ISA outflow, household time deposits lost a further £2.3bn in April."