Chancellor to back down over plan to curb Peps

The Chancellor is prepared to make concessions in his plans to introduce new Individual Savings Accounts following a storm of controversy over the proposals. Diane Coyle, Economics Editor, reports on a partial victory for critics of the planned accounts.

Gordon Brown has indicated to officials that he is prepared to concede ground on some of the criticisms of the proposed Individual Savings Account during the consultation period.

The most likely change would be an increase in the amount that people can transfer into a new account from existing Peps and Tessas without breaching the pounds 50,000 lifetime cap on contributions to the new accounts, according to senior sources.

The change of heart is thought to reflect ministerial unhappiness with the perception that the ISAs are part of a covert attack on the middle classes as much as an admission that the proposals are genuinely flawed.

Certainly, many experts have argued that the switch from Peps and Tessas to ISAs will discourage middle-class savers without increasing saving by the less well-off by very much. Most recently the National Institute for Economic and Social Research, a respected independent think-tank, said the Government's proposals would reduce the amount saved in Britain.

The main criticisms of ISAs by the financial services industry, however, have focused on the difficulty of administering the pounds 50,000 lifetime limit. Potential providers of the accounts have said it will be difficult to keep track of separate accounts and to monitor withdrawals.

However, Treasury sources have already indicated that there is no intention to raise or abandon the pounds 50,000 ceiling.

However, there has also been much unhappiness with the fact that the cap imposes a de facto limit on the amount that can be transferred from existing Peps and Tessas. This will affect between 10 and 15 per cent of current holders of Peps, according to the Inland Revenue.

A concession increasing the amount that can be transferred from existing accounts is likely to be announced in the Budget on 17 March.

Prudential, the UK's biggest life insurer, yesterday proposed that the Government should link the new Individual Savings Account with its other major reform of personal finance, stakeholder pensions.

The Pru said it shares concerns that ISAs will be made attractive to low-income savers at the expense of pension saving. In its Budget submission to the Government it said it wants ISA savers to be able to shift money into pensions with no tax penalty.

The Pru also suggested cash bonuses for long-term saving instead of the proposed tax credit of 10 per cent on the growth of the fund.

Its submission repeats a criticism made by the Institute for Fiscal Studies. In its "Green Budget" report last month, it argued that reform of tax concessions for saving should have been explicitly linked to pension reform.

Budget for work, page 20

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Commercial Vehicle Sales Executive

Negotiable: Recruitment Genius: Working with a set process to achieve profitab...

Recruitment Genius: Customer Service Executive

£30000 - £35000 per annum: Recruitment Genius: This company provides a number ...

Recruitment Genius: Facilities Coordinator

Negotiable: Recruitment Genius: A Facilities Coordinator is required to join a...

Recruitment Genius: Project Manager - Software House - PRINCE2, PMP

£35000 - £45000 per annum: Recruitment Genius: A dynamic, customer oriented Pr...

Day In a Page

Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

Greece referendum

Greeks say 'No' to austerity and plunge Europe into crisis
Ten years after the 7/7 terror attacks, is Britain an altered state?

7/7 bombings anniversary

Ten years after the terror attacks, is Britain an altered state?
Beautiful evening dresses are some of the loveliest Donatella has created

Versace haute couture review

Beautiful evening dresses are some of the loveliest Donatella has ever created
No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

No hope and no jobs in Gaza

So the young risk their lives and run for it
Fashion apps: Retailers roll together shopping and social networking for mobile customers

Fashion apps

Retailers roll together shopping and social networking for mobile customers
The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate