Cash ISAs boomed in March, with an inflow of £4.2bn keeping the rate at record levels for the year, figures from the Bank of England have shown.
The news comes as the government is in the midst of considering ISA reforms, as announced in Chancellor Rachel Reeves’ Spring Statement.
It is uncertain the nature of the reforms that are being looked at, however it is believed the government would like to encourage people to invest in UK companies rather than leave all their money as cash savings.
The scale of the issue was further illustrated by figures showing deposits in banks and building societies rose by £7.4 bn in March, according to data from the Bank of England.
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Interest rates of above 4% are still available on cash, however lower rates are expected in the second half of the year as the Bank of England cuts rates.
Mark Hicks, head of active savings, Hargreaves Lansdown, said: “Cash ISAs continued to dominate the savings market in the run up to tax year, attracting another £4.2 billion, as higher rates pushed tax-saving to the top of the to-do list.
“This keeps the market on track for a record amount of inflows over tax year end when we get the April figures. Easy access Cash ISAs are particularly in favour, as savers are attracted by the high headline rates.
“Given that markets now expect three rate cuts for the remainder of the year, fixed rate deals above 4% may not be around by the end of the year.”
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Laura Suter, director of personal finance at AJ Bell, said: “Rumours that the government was poised to slash Cash ISA allowances in the Spring Statement sparked a rush to the tax-free accounts, with savers putting £4.2bn in Cash ISAs in March.
“There’s usually a spike in people stuffing their ISAs before the tax year end, but the speculation around changes to ISAs put the rockets under that this year. The money paid into Cash ISAs was 31% higher than March last year, with an extra £1 billion paid in by the British public.
“Data for the biggest month for Cash ISAs isn’t out yet, as April typically sees the biggest inflows, with savers rushing to pay money into their accounts in the final days before the deadline.”
