Brits raiding their savings accounts to fund living expenses

New research has revealed how Brits are operating their investment savings accounts (ISA) ahead of an increase in top-up limits for over-50s next month.

A study by Abbey Savings found that more than seven million consumers withdrew money from their ISAs over the last 12 months, tapping into £11 billion worth of savings.

On average savers took out £1,573 over this period, which is almost three times as much as they did over the previous 12 months when the figure was just £579.

Nearly four out of ten (39 per cent) of those polled revealed that they made withdrawals from their savings accounts to cater for day-to-day living expenses, although some were influenced by non-essential needs.

According to the research, 22 per cent cited the need for luxury purchases as the reason they raided their savings accounts while five per cent took out money for high street shopping.

However, these figures have declined compared to last year when those who cited luxury purchases were 26 per cent and high street buyers stood at eight per cent.

Redundancy or reduction in incomes have also pushed more than three million (13 per cent) people into tapping into their savings, with unexpected needs such as home repairs also leading to five million (19 per cent) Brits raiding their savings.

According to Reza Attar-Zadeh, director of savings and investments at Abbey, one can understand why people are turning to their savings in light of the current economic climate.

"The sharp increase in the amount that people are withdrawing shows that many of us may have needed our savings to make ends meet, and just goes to highlight the importance of having savings to fall back on," she said.

"It's vital that we all keep some money aside in the event of an emergency but raiding your ISA account can prove costly in the long term as what you take out you can't replace."

Meanwhile, price comparison website moneysupermarket.com has urged consumers to make the best of their savings by taking advantage of some of the top deals in the market.

The website has revealed that top deals are currently paying 2.5 per cent above the Bank of England base lending rate, with first direct's cash e-ISA offering the best return - three per cent.

Intelligent Finance's Cash ISA, Standard Life Bank's Direct Access ISA, Barclays' Golden ISA and Marks & Spencer's Advantage Cash ISA are also among those offering high returns, according to the consumer website.

The new top-up limits come into effect on October 6th and Kevin Mountford, head of banking at moneysupermarket.com, said they will make ISAs even more lucrative.

"ISAs are a great way to save tax-free, and the increase in ISA limits will hopefully motivate more and more people to start saving, and encourage those that are already putting cash aside to save even more," he said.