Isas being used as extra pensions

12 April 2012

NEARLY half of all people taking advantage of their tax-free savings allowances are putting money away for their retirement, latest research shows. As companies close final-salary pension schemes, and retirement expectations rise, consumers are increasingly looking for ways to supplement their pension, Fidelity Investments said.

Research for the group found that 43% of people paying into a tax-free Isa planned to use their savings to boost their income when they stopped working. One in five 18 to 34-year-olds who planned to open an Isa this year said they were using the account to help them save for their retirement.

Another popular reason for taking out one of the savings accounts was to save for children, with 7% putting money away to fund their child's education, and 13% saving for other child-related costs. About 13% were using an Isa to go towards paying the mortgage or for putting a deposit down on a house.

Fewer than one in 10 people said they were simply saving to supplement their daily living costs, while 3% were using up their tax-free allowance to save for a holiday and 2% were putting money aside for a wedding.

Ann Davis, executive director at Fidelity Investments, said: 'The need to save for key life events, and especially retirement, has always been important but is now becoming increasingly vital as investors realise they can no longer rely on the state to provide more than a very basic pension. It is encouraging to see people taking up the long-term savings habit early on, and using Isas as an additional or alternative pension plan.'

The NOP survey questioned 1,961 adults.

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