Over 50s will get first crack at the new £10,200 ISA allowance, while everyone else will have to wait until next tax year to benefit.
With savings rates in freefall and the stock markets so volatile, the government was coming under increased pressure to get people saving again.
As a result, Alistair Darling used yesterday's budget speech to announce only the second increase to the ISA limit in the last decade, with savers now able to invest a maximum of £5,100 in a
cash ISA and
investment ISA respectively.
Put a note in your diary for October
The Treasury says the move will benefit an estimated 5 million Brits who currently use their full
ISA allowance.
Because over 50s (and pensioners in particular) are more likely to depend on their nest egg for their livelihood, they will be allowed to make use of the new allowance as of 6 October, while everyone else will have to wait until next April.
So make sure you put a note in your diary to make use of the full cash and investment ISA allowances this autumn.
Investors have not been put off
Barclays Stockbrokers investment head Barbara-Ann King says the increased limits are certain to drive up
ISA demand, adding that many people had already been turning to investments in the wake of falling savings rates.
“The new limits are a really positive step in encouraging people to save and invest,” says King.
“Our own research has found that even though markets have been extremely volatile in recent months, this hasn't dissuaded investors from saving, but has in fact encouraged them to consider more actively where returns can be found.”
“As a result they have moved away from cash and towards investments.”
"The increase in the limit should further incentivise the nation to save within these tax efficient vehicles, particularly the over 50s."
ISAs now key to savings
The main attraction of
ISAs is that all interest and returns are protected from the tax man.
Given that Darling is almost certain to implement a number of tax hikes in the coming years (he kicked things off yesterday with a massive new 50% tax rate for high earners), it is essential you start filtering your money into these
tax-free vehicles now.
