More than one in two people in the UK (51%) are unclear about what an ISA is, according to the latest findings from Alliance & Leicester’s Wealth Tracker Index. Alliance & Leicester asked 2,000 people what they thought the letters ‘ISA’ stand for. Only 49% of those surveyed correctly chose ‘Individual Savings Account’, while almost a third (32%) said they did not know and the remaining 19% incorrectly chose one of a number of different options.

The findings follow Wealth Tracker research undertaken in December 2003 that indicated that more than two thirds of Britons had failed thus far to use any of their tax-free savings allowance. The findings showed that of those who had invested in an ISA, the average investment stood at just £456.61. With savings rates at a low, people could benefit from higher returns if they used more of their tax-free ISA allowance. Cash ISAs tend to offer competitive rates of interest and there is the added benefit that no tax is deducted from the interest paid.

Key findings:

• 32% of people don’t know what ‘ISA’ stands for. Men are more aware than women - 28% of men do not know the meaning of ISA, compared to 35% of women.
• 49% correctly answered that the letters stand for ‘Individual Savings Account’. 51% of men and 46% of women chose the correct meaning of the acronym ISA.
• Those in their forties had the greatest knowledge of the savings scheme, with just over one in two (53%) opting for the correct answer. Those aged 16-19 and those in their twenties had the poorest knowledge with just 37% and 49% respectively opting for Individual Savings Account as the correct answer.

Regional findings:

• People in Yorkshire and Humberside had the greatest knowledge of ISAs, with 58% knowing what ISA stands for. They were closely followed by those in the North West, at 57%.
• Those in the West Midlands had the poorest knowledge, with just one in four – 40% opting for Individual Savings Account as the correct answer. People in the North also showed a lack of understanding, with just 41% choosing the right answer.

Sarah Whitehead, Product Manager for Investments at Alliance & Leicester said: “Recent Wealth Tracker research found that that two thirds of Britons had not invested in an ISA this tax year and the latest findings show that a lack of understanding of the product could be largely to blame. With less than half of people knowing what an ISA is and the end of the tax year approaching, the race is on for ISA providers to highlight the benefits of tax-free saving. Investors should be making the most of their tax-free saving allowances as the Treasury has announced that it plans to reduce the maximum amount of money that can be saved each tax year from £7,000 to £5,000.”