UK savings statistics never cease to amaze me. For example, in the 2016/17 financial year, just 11.1m Britons contributed to an ISA, according to an HMRC report. Now, the UK has a population of around 66m people, so that means that, during that financial year, just 17% of the population — less than one in five people — subscribed to an ISA.
That’s a worrying statistic. It’s clear to me that the savings message isn’t sinking in.
Of course, plenty of people have valid excuses. Some already have adequate retirement savings in their ISAs. So, there’s no need for them to contribute more. Others have built up significant balances in their workplace pensions or SIPPs. So ISA savings may not be needed by them either.
Yet for others, some excuses are very questionable indeed. “I can’t afford to save” is one line that the non-savers trot out regularly. “I’ll rely on the State pension” is another popular attitude among non-savers. “I’m too young to save for retirement” is a third excuse that we often hear.
Make no mistake, rolling out these kinds of excuses is a dangerous game when it comes to saving for retirement. People using these excuses may receive a nasty shock when they reach retirement age. For example, the State pension is currently just £164 per week. And that’s if you actually qualify for it. Could you live on that alone?
Take control of your future
If you plan to enjoy a comfortable retirement, contributing to an ISA on a regular basis is a very sensible strategy. Here’s why.
For starters, regular savings add up over time. Even just saving £20 per week can make a difference over the long run. Saving and investing money on a regular basis is one of the most effective ways of building long-term wealth. Putting a little bit aside every month into an ISA could have a huge impact on your quality of life in retirement.
Second, ISAs are tax-free. That means that any interest or capital gains that you make within your account are yours to keep. You won’t need to hand over a slice of your gains to the taxman. That’s an underrated benefit. Paying no tax on your investment gains can boost your wealth significantly, over the long term.
Third, by contributing to a Stocks & Shares ISA or a Lifetime ISA you could take advantage of the vast range of fantastic investment products that are available to UK investors. For example, Terry Smith’s Fundsmith Equity fund has returned nearly 90% over the last three years alone. Are you capitalising on these kinds of opportunities?
For UK investors, ISAs (the two types I mentioned, not the cash variety) remain among the best products for long-term saving and investing. If you plan to enjoy a comfortable retirement, it’s probably a smart move to contribute to one on a regular basis.
Of course, there are plenty of other things you can do to maximise your retirement wealth. For more wealth-building tips, check out the free report below.
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