ISA savings system shake-up urged

 

The ISA savings system should be revitalised to help shelter beleaguered savers and struggling first-time buyers from taxation, campaigners have said.

Savers have been experiencing the "perfect storm" of an all-time low bank rate giving them little real return on their cash pots, combined with high living costs and tough employment conditions.

From April, £11,280 can be invested in a stocks and shares Isa, and up to half of this (£5,640) can be saved in a cash ISA.

But Nationwide is calling for Chancellor George Osborne to raise the cash ISA limit to £10,680, double its current limit, to help savers concerned about the erosion of their income caused by inflation as well as first-time buyers trying to save a typical 20% deposit.

An increased ISA allowance could help offset the blow being dealt to first-time buyers later this month with the ending of a two-year stamp duty concession for this sector of the market.

Graham Beale, chief executive of Nationwide, said: "Many savers prefer the security of cash savings, but the current Isa restrictions are limiting the amount they can save tax-free.

"If the cash ISA limit is increased to £10,680 from its current limit of £5,340 it will not only help savers address the inflationary pressures, but also help borrowers struggling to raise a deposit."

The typical savings interest rate has plummeted from 6.52% in 2008 to less than 3%, while current account customers have increasingly found they are earning no interest at all as several banks have slashed interest rates to zero.

More than £100 billion is sitting in accounts which are paying no interest, according to Bank of England figures, compared with around £15 billion to £20 billion in the years before the financial crisis.

Ros Altmann, director-general of over-50s group Saga, said low interest rates and quantitative easing have hit annuity rates, resulting in more than a million pensioners buying an annuity which will give them a lower pension for the rest of their lives.

She said: "At the very least, we call on the Chancellor to extend the ISA allowance in his forthcoming Budget to enable savers to shelter what's left of their savings income from additional taxation."

The Building Societies Association (BSA) said it seemed "illogical" to set the cash Isa limit at half the overall allowance, "giving those nervous of stocks and shares access to only half of their annual Isa allowance".

The body said transfers should be permitted from stocks and shares ISA to cash ISAs, something which can only happen in the opposite direction under current rules.

The BSA said: "This change would make adult ISAs consistent with the new Junior ISA. It would allow savers, particularly those approaching retirement, to transfer into less volatile cash investments, protecting their nest egg."

PA

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
2015 General Election
May2015

Poll of Polls

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

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + uncapped commission : SThree: Hello! I know most ...

Recruitment Genius: Graduate Web Performance Consultant Trainee

£22000 - £28000 per annum: Recruitment Genius: A Consultant trainee opportunit...

Ashdown Group: Marketing Executive - (Full marketing mix) - Knutsford

£22000 - £25000 per annum + Benefits: Ashdown Group: Marketing Executive - Knu...

Ashdown Group: Web Developer - ASP.NET, C#, MVC - London

£45000 - £55000 per annum + Excellent benefits: Ashdown Group: Web Developer -...

Day In a Page

Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss
Tony Blair joins a strange and exclusive club of political leaders whose careers have been blighted by the Middle East

Blair has joined a strange and exclusive club

A new tomb has just gone up in the Middle East's graveyard of US and British political reputations, says Patrick Cockburn
Election 2015: Meet the top 12 wacky candidates seeking your vote in May

Election 2015

Meet the top 12 wacky candidates seeking your vote in May
Countdown to the election: Operation Save Danny Alexander shifts into high gear as the SNP target his Commons seat

Operation Save Danny Alexander shifts into high gear

The Chief Secretary to the Treasury didn’t forget his Highland roots in the Budget. But the SNP is after his Commons seat
The US economy is under threat because of its neglected infrastructure

The US is getting frayed at the edges

Public spending on infrastructure is only half of Europe’s, and some say the nation’s very prosperity is threatened, says Rupert Cornwell
Mad Men final episodes: Museum exhibition just part of the hoopla greeting end of 1960s-set TV hit

New Yorkers raise a glass to Mad Men

A museum exhibition is just part of the hoopla greeting the final run of the 1960s-set TV hit
Land speed record: British-built hybrid rocket car aims to be the fastest on Earth

British-built hybrid rocket car aims to be the fastest on Earth

Bloodhound SSC will attempt to set a new standard in South Africa's Kalahari desert
Housebuilders go back to basics by using traditional methods and materials

Housebuilders go back to basics - throwing mud at the wall until it sticks

Traditional materials are ticking all the construction boxes: they are cheap, green – and anyone can use them
Daniel Brühl: 'When you have success abroad, you become a traitor. Envy is very German'

Daniel Brühl: 'Envy is very German'

He's got stick for his golden acting career and for his beloved restaurant - but Daniel Brühl is staying put in Berlin (where at least the grannies love him)
How Leica transformed photography for ever: Celebrating 100 years of the famous camera

Celebrating 100 years of Leica

A new book reveals how this elegant, lightweight box of tricks would transform the way we saw life on the street and in fashion, on the battlefield and across the world