A study by LV= found that about one in three savers are using ISAs to fund their retirement as well as using traditional pensions.

More than six in 10 people (62%) in the 55 to 64-year-old age category say they are relying on ISAs for at least part of their retirement income.

The figures suggest ISAs are not just a tax free haven for spare cash.

The LV= Wealth and Wellbeing Research Programme ­– a quarterly survey of 4,000 UK adults – found that:

• 37% of UK adults are using an ISA to save for retirement, rising to 62% for those aged 55-64
• 10% are saving into an ISA towards a mortgage deposit, while another 10% plan to use their ISA savings to gift money to family members
• Men are 11% more likely to be saving in their ISA for retirement than women (42% vs 31%)

Data from LV= also revealed that more than three quarters (77%) of UK adults aged 25-44 were interested in a stocks and shares ISA with ‘smoothing elements’ to cope with day-to-day stock market volatility.

LV= says ISAs have some tax advantages over pensions, especially for those who have already started accessing their pension savings who are limited to adding £10,000 to a SIPP each year. In comparison, the annual limit for ISAs is £20,000.

The firm says ISAs also offer greater flexibility and earlier access to money. With the minimum pension age increasing to 57 and the State Pension age rising to 67 by 2028, this may be an important factor in ISA usage for those looking to retire early.

However, pensions savings provide tax relief on top of any sums invested whereas ISA investments and savings are added from already taxed income and no tax relief applies.

Adults in younger age brackets were more likely to be using ISA savings for reasons other than retirement saving: over a quarter (26%) of 18–34-year-olds said they intended to use their ISA savings for a mortgage deposit instead.

• LV= surveyed 4,000 nationally representative UK adults via an online omnibus conducted by Opinium in March 2024.