23rd February 2015
The retirement ISA’, or ‘RISA’ is emerging as the preferred retirement savings vehicle of many Britons claims new research from fund manager BlackRock.
The group’s latest Investor Pulse survey has found that savers rely heavily on ISA products to help save and fund their retirement, with almost two in five, or 39%, intending to use their ISA for this purpose.
ISAs are tax efficient savings vehicles, where savers can squirrel away up to £15,000 a year and all interest and gains are tax free.
However Alex Hoctor-Duncan, savings and investments expert at BlackRock noted that worryingly, 68% of ISA holders looking to retire in the next decade only save into cash ISAs, which would have been victims of inflation during recent years.
He says: “Savers must be aware that in order to receive an income and have their savings last throughout retirement, they have to give their hard earned cash a job so it works harder for them and generates a sustainable income.
“The current low inflation levels should not lull people into a fall sense of security. Cash has lost almost 30% of its real value in the past 10 years because of inflation. Even if a saver has been quite nimble in chasing the best deposit and cash ISA rates, they would still have made a loss in real terms of 6%.”
The changes that the Government introduced, allowing savers and investors to merge cash and stocks and shares ISAs to a limit of £15,000, has been welcomed however, as nearly half of ISA holders said they would hold more cash as a result.
“Britons need to make use of their ability to build their savings and allocate to stocks and shares and not to use cash as a safety blanket, because it won’t keep them warm later in life,” added Hoctor-Duncan