Many UK consumers are unaware that they have reduce tax payments on savings with products such as ISAs, according to a new survey.

Individual Savings Accounts, or ISAs, allow consumers to save up to £7,200 in stocks and shares or cash without having to pay tax on any interest accumulated. But research from insurance firm Scottish Widows has revealed that more than three million people in the UK do not know what an ISA actually is. Those in the 18-24 age bracket were least likely to be aware of tax-free savings accounts.

The study found that three quarters of respondents who had not previously put money away in savings are now considering doing so. Yet just a quarter of these intend to open an ISA in the next year, with another 16% saying they were unsure if they will.

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Savings deposits fell again in February, indicating that consumers’ budgets are coming under pressure due to the recession, the British Bankers’ Association has said.

According to the BBA, personal deposits dropped by £0.1 billion last month, after a much larger £2 billion fall in January, because of increasing pressure on personal finance from the ongoing credit crunch and a series of rates cuts by the Bank of England.

Savings have fluctuated recently, as consumers face conflicting financial pressures. On the one hand many people are uncertain about their financial future, and are likely to save their money for a rainy day rather than go out and spend it.

On the other hand, the Bank of England’s policy to cut interest rates to 0.5% had has a marked effect on savings rates, with average instant access savings accounts yielding just 0.17 percent a year in interest. Some consumers are likely to consider it pointless to make personal deposits when the return is negligible.

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Gordon Brown has indicated that ISA limits for pensioners could be raised.

Speaking during a BBC Radio Four phone-in, Brown said yesterday that pensioners could benefit from a higher limit on their tax-free ISAs, following recent reductions in savings rates because of the Bank of England’s decision to cut the interest rate to just 0.5%, its lowest level since the Bank was founded in 1694.

Mr Brown explained that he was currently “looking at” making the change, which would allow over-65s to keep more of their savings in the tax free account. The legal limit for cash ISAs currently stands at £3,600.

Pensioners have been particularly hard hit by recent cuts to the Bank rate, since many live off interest from savings. Currently the instant access accounts offer average returns of just 0.17%, down from 2.69% a year ago and 0.28% at the end of January.

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For a limited time only customers who sign up to a Sainsbury’s internet savings account can benefit from a variable rate of 3% AER, with returns guaranteed to be at least 2% above the Bank of England base rate for the next 12 months.

To benefit from the offer, customers need to open an account by 17th March with an initial deposit of between £5,000 and £100,000, and cannot withdraw from their account during the first 12 months. Customers who take out money within this timeframe will receive Sainsbury’s standard Internet Saver rate only, which is currently 0.75% AER variable.

Although the Sainsbury’s account does not offer the market lead on savings, the 12 month guarantee brings peace of mind that no matter how much interest rates fluctuate, your deposit will be gathering a safe, and decent return.

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HSBC announced plans to ask shareholders for £12.5 billion this morning, as it seeks to strengthen its financial position during what looks to be the worst global recession in decades.

HSBC chairman Stephen Green said that the extra cash will “enhance our ability to deal with the impact of an uncertain economic environment and to respond to unforeseen events.”

The cash call comes as HSBC revealed a 62% drop in profits last year to $9 billion. While its operations in Europe, Asia and Latin America were all profitable in the year, its North American operations were hit badly because of losses in the US sub-prime mortgage market. The bank reported a loss of $15.5 billion in North America, and said it expected to stop the majority of its consumer lending in the US, which would result in around 6,100 job losses.

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550,000 people in Britain have not claimed Premium Bond wins, worth £30 million in total.

National Savings and Investments (NS&I) said unclaimed wins ranged from £25 to one prize of £100,000. Premium Bond cheques are sent to the address to which the bond is registered. However, many savers forget to inform NS&I when they move house.

Many people were given Premium Bonds as children by their parents, but are unaware of this. Also, people whose relatives have died may have inherited Premium Bond wins without any knowledge of this.

“We urge anyone who believes they could have unclaimed prizes to check with us,” said Sally Swait, Premium Bond manager at NS&I.

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Woolworths is set to make a comeback as an online business this summer, after the chain was bought up in a surprise deal by Shop Direct Group, the owner of Littlewoods. The takeover marks an end to the pick’n'mix retailer’s high-street presence.

A month after the last high street Woolworths store closed its shutters, the home shopping group Home Direct, owned by the Barclay brothers, is thought to have paid administrators Deloitte between £5 million and £10 million for the Woolworths brand, but declined to provide exact figures. Shop Direct has also bought Woolworths’ childrenswear brand Ladybird.

Shop Direct hopes to move the business away from household merchandise to focus on gifts and children’s clothing. The Ladybird brand will be sold both online and through Shop Direct’s various catalogues including Kays and Littlewoods.

Mark Newton-Jones, chief executive of Shop Direct said: “[The product offer] will be more targeted than the previous offer. It will definitely have childrenswear and definitely have entertainment, but I really don’t think we will be selling washing up bowls and light bulbs.”

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Manufacturing output in the UK suffered its sharpest decline in 30 years, according to official figures released today.

November’s year-on-year decline of 7.4 percent was the worst performance since 1981, according to the Office of National Statistics. The figures came as a shock to analysts, who had predicted a 6 percent fall year-on-year.

The figures just serve to highlight the troubled state of the British economy, following yesterday’s decision by the Bank of England to cut interest rates to 1.5 percent, their lowest level in the institution’s 314 year history.

Manufacturers have suffered from a decrease in demand from UK customers and stricter credit terms imposed during the current economic downturn. The fall of the Pound Sterling against the dollar and euro should have given manufacturers a boost in foreign markets, but this has been largely offset by a decrease in demand for UK goods in the US and Europe.
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One upshot of the credit crunch is that savings rates are now at their most attractive, so there’s never been a better time to put your pennies aside – available rates on cash mini Isa’s are currently hovering around 6.25-6.5 per cent, the highest they’ve been in recent years.

Also, due to the rule changes which take effect as of today, there has never been a better time for existing savers to cash in – the maximum you can save in cash in an Isa has increased from £3,000 to £3,600.

Because of this, and of the current economic climate, the already highly competitive ISA market has transformed into a veritable snakes’ nest, with financial institutions on all sides fighting for your investment. Some lenders will pay out interest on amounts as little as £1, with others requiring a more substantial deposit of around £1,000 – some banks requiring higher investments of these types are promising to pay out rates of 10 per cent; anyone fancy getting 10 per cent interest on tax free savings? (more…)

The 2008 Budget saw the Chancellor raise the Maxi ISA limit to £7,200, and the Cash Mini ISA limit pumped up to £3,600 in a bid to encourage people to invest more money into tax free savings schemes.

The new rules for ISAs, which come into effect on April 6, will see investors able to save more overall, but some savers will have a lower investment ceiling for their stocks and shares than they do now. Currently, someone can invest up to £3,000 each tax year in a cash mini, £4,000 each year in a stocks and shares mini or a combined total of £7,000 of which £3,000 may be cash. (more…)