Savers were recently told that, from next April, the yearly ISA limit will be increased by an additional £600.
The yearly ISA savings allowance will be increased to £11,280, up from its current figure of £10,680, in time for the new tax year starting on April 6 of next year. This provides some respite to the 20 million strong Brits with ISAs from personal and business bank account providers such as banks and building societies, many of whom will switch to a provider with a more lucrative interest rate in order to maximise their yearly allowance.
Cash ISAs are limited to a total of £5,640. An alternative to cash ISAs, investment in stocks and shares ISAs, can accommodate the entire £11,280, provided any cash ISA deposits are subtracted from that total sum.
The ISA limit was linked to inflation for the first time ever last year. However, as there are two measures of inflation – the RPI and the CPI – limits, which were tied to the former will now be linked with the latter starting from 2012.
One savings expert, Michelle Slade, remarked that the high inflation in September actually benefited savers, as new ISA limits are calculated annually during that month. Ms Slade said that savers will doubtlessly welcome the news, especially those who capitalise on using their full tax free allowance every year.
Savers have found it a struggle to find a competitive return, the savings expert added, especially since high inflation levels are high enough to eclipse the returns on nearly every retail savings product currently available. Meanwhile, ISAs have been growing in popularity due to their high rates and tax-free nature, but Ms Slade said the best way to help savers is to raise the base rate.