The majority of savers have not taken up their full ISA allowance, Halifax research shows, and there is a “significant lack of knowledge” about how ISAs work.

But the value which Brits have invested in ISAs has increased, Halifax found, with the total value amounting to £220.5billion – seven times higher than the £28.6billion total when they were introduced in 1999.

The study also revealed that Cash ISAs are the most popular ISA option amongst British savers, totalling £142.3billion and accounting for 65 per cent of all ISA savings.

A lot of people open ISAs but then fail to utilise them, according to Halifax, with less than a quarter using their full ISA allowance in the 2008/2009 tax year.

While a further 11 per cent have said that they will be using their allowance before the end of the tax year on April 5, this will leave two thirds of British savers who will still not be taking advantage of the tax-free savings offered by the Government.

Even though interest rates have fallen significantly on various types of savings accounts since the Bank of England started cutting rates in October – bringing the base rate down from five per cent in September to 0.5 per cent in March – ISAs have outperformed standard savings accounts since their inception a decade ago.

Savers who have invested the maximum amount into an ISA since they were introduced will, on average, have reaped double the rewards than someone investing the same amount into a typical notice savings account over the same period, Halifax says, raking in £8,403 compared to £4,165.

Flavia Palacios Umana, head of savings at Halifax, said: “The ISA has proved to be a very popular savings vehicle since its introduction almost ten years ago, but it is worrying that savers still aren’t making the most of their allowance each year. Halifax encourages all savers who have not opened or saved up to the ISA limits this year to do so before the new tax year on 6th April.”

Despite being one of the most popular savings vehicles in the UK, the research from Halifax revealed that more than half of Brits do not know what the acronym ISA represents, and more than three quarters are confused about how much they can invest in Stocks and Shares ISAs and Cash ISAs.

Confused about ISAs? Read our FREE online Guide to ISAs and compare ISA rates

© Fair Investment Company Ltd