Paragon Bank has urged savers not to miss out on building tax free savings through their ISA allowance, as industry data shows ISA category growth is 36 times slower than the non-interest bearing market.

Bank of England data shows that the portion of the market that earns no interest at all stands at £225.5 billion and has increased by 25% in 2020, while the ISA market has increased by a fraction of that figure at 0.7%.

The ISA category’s growth has also slumped considerably year-on-year. It grew by 4.9% in 2019, which also marks a seven-fold decrease between 2019 and 2020.

Paragon Bank has emphasised the roles of ISAs in creating long-term tax-free savings and has encouraged savers to think of the long-term picture when considering whether or not to use their ISA allowance.

Derek Sprawling, savings director at Paragon Bank, said:

“Even while market rates fluctuate, ISA allowances are designed to contribute to building tax-free savings over a saver’s lifetime, and the yearly allowance is a ‘use it or lose it’ scenario.

“While your savings might be earning a lower rate than usual in a cash ISA at the moment due to market conditions, the savings environment will eventually recover. When it does, those savings will remain tax-free and they can be consolidated into another product, or transferred to a stocks and shares ISA.

“By not using an ISA allowance because of the current market conditions, savers are missing out on the opportunity to build on their tax-free savings.”

Last year, Paragon introduced Flexible ISA and ISA Wallet features across its products, allowing savers to split their allowance across multiple Paragon ISAs as well as having the freedom to withdraw and replace savings without the allowance being impacted.

It also launched a Lifetime ISA in late 2019, allowing savers to receive a 25% government bonus on balances up to £4,000 per year, to save towards retirement or a first house deposit.

Derek Sprawling added: “We understand that market rates are currently challenging, and with ISA rates often lower than non-ISA products, it’s tempting to save the money away from cash ISAs.

“For this reason, Paragon strives to match rates on easy access ISAs to those offered on non-ISA easy access products, so savers can reap the benefit of tax-free savings even in the current market, while rates are lower than usual.”

 For further information about this release, contact:

Leila Taleb

Media Relations Manager 

[email protected]