Official figures from HMRC show that people are saving more in tax-free ISAs than ever before.

In the 2010-11 financial year there were 15.3 million active ISA accounts, the most since the introduction of individual savings accounts in 1998. That means 391,000 new accounts were opened last year which seems to dispel claims that rising costs would stop people saving.

The average deposited in a cash ISA last year was £3,190, whilst savers put an average £4,627 into a stocks-and-shares equivalent. The interest from an ISA account is tax free and the investment is sheltered from the taxman.

Matt Griffith, a spokesman for PricedOut, has suggested that first time buyers should take advantage of ISAs to help them save for a deposit. As from the start of this financial year, savers can have up to £10,680 tax free in these savings accounts.

Griffith went on to explain that using chunks of money such as ISA cash is probably the only way a lot of UK consumers and freelancers will be able to afford a deposit in the next few years as banks and building societies continue to pay meagre rates of interest on ordinary savings accounts.

He also said first time buyers should ask their MPS why the UK has not provided cheaper housing for their generation. The Countryside Alliance published results of a study last week that showed that British local councils failed to meet their affordable housing targets by more than 76% last year.

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Contractors may want to take the advice of the Nationwide and use their ISA tax relief allowance for this year before it runs out.

After all, why not use a tax avoidance method that definitely is legal?

The end of the tax year is drawing closer for people who want to deposit the maximum £10,200 in a tax free ISA. The director of savings and investments at Nationwide, Robin Bailey, said that somebody who had invested the maximum in April last year would have seen that investment grow to up to £11,077 now.

He continued by saying that people are still confused about ISAs and therefore they do not take full advantage of the tax benefit on offer. Nationwide estimates that cash ISAs are saving consumers more than £680 million every year in tax which is a substantial saving. But there is still a need for better education on the benefits of ISAs to help consumers save even more, he added.

The UK is no longer a nation of savers if the latest report from Scottish Widows is to be believed. More than 33% of adults saved absolutely nothing last year, a 16% rise from the previous year.

The study investigated the savings habits of specific groups and found that 31% of those earning between £20,000 and £30,000 did not put any money into savings. Of those who did save, 56% saved 5% or less from their salary. 72% of those who did not save said that high living costs prevented them saving.

People aged between 45 and 54 are having the biggest problem saving with 40% saying they were not able to save anything last year. 33% of young adults between 18 and 24 were also unable to put any money away.

Ian McGowan from Scottish Widows said that an increasing number of people do not understand the benefits of saving even a small amount. Even though it is not practical at the moment to save large amounts, it is important that the UK savings culture is not lost completely, he concluded.

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Although the government spending cuts may not have a direct impact on everybody, it’s worth bearing in mind the underlying message that the coalition is trying to get through.

The UK can no longer afford to carry on spending and getting into yet more debt, and this applies just as much to individuals as it does to government departments.

Making the most out of any cash left over at the end of the month should become a priority for freelancers. There are lots of savings products currently on the market but the trick is finding the one with the best returns, whilst at the same time ensuring you can get hold of the funds in case of an emergency.

Fixed-rate ISAs can pay better interest rates than those available on other savings accounts. For example, the Post Office offers a two year fixed-rate ISA at 3.1% while the Halifax is currently offering a rate of 2.8% on a variable rate ISA with unlimited withdrawals.

In fact ISAs generally offer the best interest rates, but it’s worth bearing in mind that although the returns are exempt from capital gains and income tax, you are currently only allowed to invest £5,100 per year in an ISA. Another fact to bear in mind with ISAs is that some providers only guarantee their current rate for 12 months, after which it will be reduced and consumers may well find it worthwhile moving their money elsewhere.

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Young umbrella company contractors need to be encouraged to save for their retirement, but in order to make the prospect appealing, the UK pensions industry need to undergo radical reform, according to George Ladds from the Fair Investment Company.

The company’s head of pension and investment research says the recent announcement to remove the requirement for people to start taking money from an annuity once they reach 75 is definitely a step forward but he hopes to see further measures put in place in the future.

Mr Ladds thinks that better education for young people, regarding their possible retirement savings options, would be advantageous. One change he says could be beneficial is the merger of ISAs with pensions. He believes this would encourage younger people to think more closely about their retirement.

Last week, Aviva published research stating that UK adults need to contribute a minimum of £10,300 per year towards their pension fund in order to support their retirement.

The CEO of Aviva said the results were startling and warned individuals that they need to start saving as early as possible in order to have enough money to support their old age.

People are living longer and the UK currently has a pensions shortfall of £318 billion, the largest of all the countries in the EU. Women, in particular, should take heed of these warnings as a large proportion of females over the age of 40 expect to rely on the pension of their husband.

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