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August 5, 2008

Britons reduce current account balances and dip into ISAs

by Gill Montia

Story link: Britons reduce current account balances and dip into ISAs

HSBC has revealed that its current account holders have, on average, 5% less cash on deposit than one year ago.

According to the bank, the typical balance for a UK customer is now £950, down from pre credit crisis average of £1,000.

While some of HSBC’s 8.2 million current account customers are no doubt struggling with rising living costs, the decline may also be due to consumers taking a greater interest in making their money work, as deposits in the group’s savings accounts have risen 19% over the past 12 months.

However, research from Abbey Savings shows that Britons are increasingly dipping into their savings.

Withdrawals from 2007/08 ISAs have risen to an average £579, with one-third of those questioned admitting they had withdrawn money from an ISA to pay daily living expenses.

A further 15% used the money to meet mortgage repayments or utility bills, while 25% had been caught short with an emergency or unforeseen cost.

Extracting money from a cash ISA is not an ideal way of topping up regular income because part of the tax allowance of £3,600 is lost forever, once a withdrawal is made.

 

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