The rising cost of living is forcing consumers to dip into their ISA savings, undoing their tax advantages, research by Abbey Savings suggests.
The study found ISA savers have withdrawn £6bn in total in the last 12 months, the equivalent of £570 each and more than a quarter of the average ISA subscription for 2007/8.
Reza Attar-Zadeh, director of savings and investments at Abbey, says pulling cash out of an ISA pot can be damaging for savers.
Cash ISAs have an allowance of £3,600 per tax year and any withdrawals made can not be replaced, so part of your allowance would be lost forever, she says.
“If you're saving towards a goal such as a home deposit or looking to maximise the amount of cash you have put away for retirement then the advice must be to try and reduce your outgoings rather than dip into your ISA pot."
Almost a third of people say day-to-day living costs have forced them to make withdrawals, while a further 15% cite mortgage repayments or utility bills as the reason for pulling out their cash, according to Abbey Savings.
However, a quarter of people put their ISA money towards luxury items such as holidays or cars, while a further 8% say high street shopping purchases persuaded them to part with their savings.
The research also found 13% of Britons have used their money to help friends and family with their finances, while nearly a quarter say unanticipated costs such as emergency home repairs have swallowed their savings.
Attar-Zadeh says: "With the cost of living increasing, a significant number of us are being forced to use our savings to meet the rising costs.
"You never know when you're going to need to fall back on your savings and in this respect dipping into them to meet bills such as gas bills is no bad thing."
Approximately 41% of the adult population holds an ISA and it remains one of the most popular ways to save, with only Instant Access Savings Accounts proving more popular at 74%.IFAonline
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