The mass exodus of small investors from shares during January - withdrawals of £550 million made it one of the worst months ever for fund managers - suggests many people won’t bother to use their tax-free ISA allowances which expire on April 5.
Research from Lloyds TSB shows more than nine out of 10 UK adults fail to use their full tax-free ISA (Individual Savings Account) allowance to invest in both high interest cash accounts and shares.
In the current tax year until April 5, they can put up to £3,000 in a Mini Cash ISA, or £4,000 in a Mini Shares ISA, or alternatively £7,000 in a Maxi Shares ISA.
ISAs are not only for affluent folk with thousands to put away. Many can be opened with just £1.
Lloyds TSB savings and investments director Liz Hogbin also warns that regular ISA savers miss out by failing to switch their accounts from previous years to providers paying higher rates.
"The average interest rate on an ISA balance of £9,000 is 5.36 per cent," she says, "but by switching to an account paying 6.5 per cent you could earn over 20 per cent more interest tax free, for very little effort."
The big attraction of ISAs, and one reason why many people use them to 'top up’ pension savings, is that the income and capital gains which they earn are free of tax as long as the ISA tax shelter stays in place.
In later life, ISA funds also avoid the tight rules controlling pensions. When you need the money, you simply take it out.
That’s why 17 million adults hold ISAs. Given the likelihood of rising taxes as the Government struggles to balance its books, the case for keeping savings beyond the taxman’s grasp grows stronger by the week.
Says Graham Barber, head of financial planning at wealth manager Rensburg Sheppards: "ISAs are one of the most commonplace savings vehicles in the UK - regardless of age or affluence - as a way to accrue tax free savings.
"Cash ISAs are particularly suited to building up 'rainy day’ savings and can be dipped into as necessary."
When Cash ISAs offer such attractive rates, savers with cash they can set aside for the medium term are mad to ignore them. Around two million cash ISAs will be opened in the current tax year.
Says Rachel Thrussell at Moneyfacts.co.uk: "Banks and building societies are upping their game as the new tax year approaches. In a more competitive environment this year, all the best buy rates pay 6.10 per cent and above."
The best buy list is currently headed by Barclays Tax Haven - paying 6.50 per cent on minimum £1 deposits, with one per cent of that a bonus lasting 12 months. Scarborough BS, paying 6.30 per cent on minimum £1,000, has no bonus in place, and nor does Abbey Direct ISA issue 2, paying 6.25 per cent on a minimum £1 deposit.
With the mini Cash ISA limit rising to £3,600 for the tax year 2008-09, a Barclays saver could swiftly stash away £6,500 to earn interest tax free by investing the maximum permitted either side of the April 5 deadline. But the Barclays account won’t take transfers from previous ISA accounts.
Moneyfacts says National Savings has been a good ISA performer over the past 18 months or so: it promises to pay interest at 0.30 per cent above Bank base rate - effectively 5.55 per cent - until April 5, 2009, on minimum £1,000 deposits.
M&S Money guarantees its variable rate Cash ISA will match Bank of England base rate until January 1, 2010. It also offers one, two and three-year Fixed Rate products, with guaranteed rates up to 5.70 per cent on accounts, inside or outside an ISA wrapper.
Lloyds TSB has tiered its ISA rates, obviously to attract transfers from rival savers: on £3,000-plus, it pays five per cent, rising to 6.50 per cent on £9,000-plus.
Lloyds TSB is also among providers paying higher rates on cash - if savers agree to invest an equal or greater amount in a Scottish Widows Investment ISA holding equities.
Icesave is another strong performer on Cash ISAs, paying 6.10 per cent on minimum £1,000 deposits. And I never feel far off the pace when I tuck away £3,000 each year with Kent Reliance BS.
Kevin Mountford, head of price comparison site moneysupermarket,com, says ISA rates will hot up during March.
"The top paying Cash ISA of a year ago wouldn’t even make today’s top 10," he says, "showing how keen banks are to lock in your cash as early as possible.
"When savers find a tax-free rate above six per cent, they should grab it."
But Mr Mountford urges regular ISA savers to find high-paying accounts ready to accept transfers of Cash Mini ISAs from previous years.
"If you have a portfolio of Cash ISAs accounts," he says, "it is important to check out the current rate they are earning, and to move them into better paying accounts.
"We could be talking about five figure sums here - but about half of the top-paying ISAs on the market don’t allow you to transfer previous lump sums in, so savers need to read the small print."
So far as equities are concerned, ISA prospects are much harder to gauge. Shares on either side of the Atlantic could still head south if credit crunch problems worsen - and many investors are fearful at the thought of erecting a ISA tax shelter around a loss.
Tony Ahearne, at online fund performance analyst Moneyspider.com, says thousands of investors in some of the UK’s biggest and most popular fund saw their funds plunge in value by 20 per cent-plus over the past year.
"If you happen to be in the Rathbone Special Situations fund - very popular with Joe Average investor - you are looking at losses of 25 per cent over the last year," he says.
Moneyspider.com charts show that even star funds like Invesco Perpetual High Income lost about seven per cent of their value in the last year. Merrill Lynch UK Dynamic, one of the better performers, lost just 0.56 per cent during the year - still a poorer outcome than leaving money in the building society.
This may be a year when equity ISAs are best left to sophisticated savers already holding sizeable portfolios assembled to reduce risk.
The best bets could be in riskier sectors, like Latin America, India, Russia or even Africa - all high-risk plays for savings vehicles targeted at cautious, long-term savers.