In today’s Budget, Chancellor George Osborne announced a set of measures that could shake up the savings market.
Today’s Budget statement, which was predicted by most to be fairly straightforward, surprised many by introducing some big changes - with the aim of supporting savers. One of the biggest changes to be announced was the merging of cash and investment ISAs into a single New ISA, which will have an annual limit of £15,000. An ISA (individual savings account) allows you to save up to a set amount each year tax-free. Previously, it was only possible to save up to half of your annual ISA allowance in cash, whereas the whole amount could be held in stocks and shares.
Family finances expert at Standard Life, Julie Hutchinson, welcomed the move:
“It’s good news that the ISA limit will be increasing in the future to £15,000, allowing people to save and invest more of their money tax efficiently. And now that there is no cap on cash holdings within this limit, and transferring between all kinds of ISAs has become possible, it's really positive news for investors.
“The higher limit will make it easier for people to build an appropriate cash fund as an emergency buffer, then consider making the most of the potential offered by a Stocks and Shares ISA which can be the smart next step to take for the longer term. ”
However, some felt that the Budget didn’t do enough to address concerns over the cost of living. Jafar Hassan, personal finance expert at uSwitch.com, said:
“Today’s announcement is a real crowd-pleaser for savers ahead of next year’s election.
“However, while this is great news for the one in three Brits who plan to use their full ISA allowance this year, the government still needs to do more to help the 19% of consumers who say they can’t afford to save into an ISA. With average earnings standing at just £26,500 per annum, I would question the number of savers that can afford to save £15,000 per tax year. Plus, with interest rates at an all-time low, anyone who does save the full amount only stands to gain an extra £25 or so in tax free savings.”