"Piggy bank mentality" of young Britons

Young Britons have a "piggy bank mentality", preferring to keep their savings in cash rather than putting it in a savings account, a new report claims.

Research found that 15 per cent of 18 to 29-year-olds hold onto cash rather than earning interest on their savings by putting it in an account.

When it comes to choosing saving products, Britons of all ages consider a good rate of interest (84 per cent) as a more important factor than not paying tax on savings (40 per cent), the Alliance & Leicester study found.

However, 20 per cent in tax, doubled to 40 per cent for high-rate tax payers, is automatically deducted from all non-Isa savings accounts, according to the bank, reducing the actual interest rate on an account paying five per cent to just four per cent.

The bank has calculated that savers could be earning £73,611 extra over a lifetime if their savings were invested in a tax efficient Isa.

Ross Dalzell, manager for savings at Alliance & Leicester, said: "It is amazing that after all the recent media attention on Isas that many of the myths and misunderstandings surrounding them are yet to be dispelled for a high proportion of the population."

According to research from Friends Provident, confusion is one of the main reasons that many Britons are not taking out Isas, with 25 per cent of people saying they are too complicated.

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