Should Individual Savings Accounts (ISAs) be scrapped as they are failing in their objective to get people on lower incomes to start saving?
Yes, says a report from leading think-tank the Institute for Public Polic Research (IPPR).
ISAs first came about in 1999, and aimed to get those on lower incomes to start using the piggy bank to save. But the IPPR claims that less than a third of families on incomes of £600 a week have one at all.
Nick Pearce, IPPR director, said: ‘Our research shows that people on low-to-middle incomes want simple savings accounts with few terms and conditions, little in the way of small print and paying an easily understandable reward. The tax relief given to higher income earners could be withdrawn without reducing their propensity to save.’
The think-tank instead wants to introduce a new account to boost poorer savers. Called the Lifetime Bonus Saving Account, the account holder would receive a ‘bonus’ on a sliding scale, with a cap of £3000.