Since 2015, married couples and civil partners have been entitled to an extra ISA allowance when their partner dies. 
 
Known as an Additional Permitted Subscription (APS), the allowance is equivalent to the value of a partner’s ISA account at the time they passed away. 
 
But Freedom of Information data, obtained by Zurich from HMRC, found just 21,000 people used the rules to inherit a partner’s ISA balance in 2017-18.
 
In contrast, the Tax Incentivised Savings Association (TISA) estimates 150,000 married ISA holders pass away annually – which could suggest as few as 14% of grieving savers made use of the allowance.

And with latest figures from the Office for National Statistics showing there are more than 22.1 million ISA holders in the UK, experts are concerned thousands could be missing out on the allowance.
 
Alistair Wilson, head of retail platform strategy at Zurich, said: “Despite being in its fourth year, the take-up of this tax break looks shockingly low.
 
“People who miss out on the allowance will be hit by a tax bill that quickly eats into the returns on their savings and slows down the growth of their nest egg.
 
“With the average value of an inherited ISA standing at £55,000, savers could be giving away £110 a year which they could have legitimately avoided.”
 
He added: “Although it’s not nice to think about a loved one passing away, speaking to a financial adviser can help you pass on wealth efficiently and ensure you or your family don’t pay any more tax than needed.”
 
Under APS rules, if a partner had £50,000 in ISA savings when they died, you would be able to invest £50,000 tax free on top of your own £20,000 annual ISA allowance – taking your total allowance for the year to £70,000.
 
According to the data 15,000 people benefited from a deceased partner’s ISA allowance in 2015-16, adding £635m to their savings. 
 
This increased to 25,000 people in 2016-17, who inherited £1.1bn before falling to 21,000 in 2017-18, with savers sheltering the same amount.
 
In 2017-18, the average annual APS was £55,000, up from £45,000 in 2016-17 and £40,000 in 2015-16 
 
Mr Wilson added: “It’s not clear what’s stopping some savers from taking advantage of the allowance. 

“Consumers might be baffled by the rules, or simply unaware of them. 

“Not all providers are obliged to accept a transfer of an APS allowance, which might also be a barrier holding savers back.”