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Brits 'dipping into savings'

By Sarah Engle, Tue 5 Aug 2008 - Published in Banking

Britons are being forced to "dip into" their savings as the cost of living rises, it has been claimed.

A new survey by Abbey Savings found that a collective £6 billion has been withdrawn from individual savings accounts (Isas) in the past 12 months, which is an average of £579 each.

Isas are used by consumers often as a means of putting money away and accruing the maximum amount of interest on it tax-free. Isa holders can save up to £3,600 in a Cash Isa during each 12-month period.

However, the results of the survey suggest that people are using these funds to help them pay for day-to-day living. Some 31 per cent said this was why they had raided the proverbial piggy bank.

And while this is not always a bad thing, said Abbey's director of savings and investments Reza Attar-Zadeh, it can damage savings prospects in the long-term.

"Any withdrawals made cannot be replaced, so that part of your allowance would be lost forever," he explained, going on to suggest that instead of dipping into an Isa, people reduce their outgoings.

Those who want to save more than the Cash Isa limit of £3,600 can also open a stocks and shares Isa, in which another £3,600 can be kept.