David Prosser: New Isas, old problems

Outlook: The tax break is expensive and adds to the impression that Isas are over-complicated
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The Independent Online

Some good news for hard-pressed savers. From today, the maximum permissible investment in a tax-free individual savings account rises by £3,000 to £10,200. The whole lot can be invested on the stock market (or other asset classes, such as bonds) or half of it can be shovelled into cash deposits. Either way, all income and growth is tax-free.

There is just one catch. The new rules only apply to savers aged 50 or above. Everyone else is getting the extra £3,000 allowance too, but not for this tax year – they'll have to wait until 2010/11.

It's a curious distinction. Older savers have a bit less time to put cash by before retirement, of course, but an extra six months is not going to make much of a difference, individually, to their fortunes in old age. And while older people are more likely to be dependent on savings interest for income – and therefore struggling in a low interest-rate environment – this won't make much difference.

Collectively, however, the tax break is expensive. It also adds to the impression that Isas are over-complicated. With different rules for people of different ages and different investment limits according to the asset you choose to hold, the scheme is off-putting. Good intentions spoiled again.

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