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&#39Government torpedoeing Isa flagship&#39

The Government has turned investors off saving by cutting the Isa allowance and abolishing tax credits on the account dividends, says Isis Asset Management.

Its research reveals that 30 per cent of savers now feel less inclined to invest in Isas as a result of the plans to abolish tax credits on dividends and reduce the annual allowance from £7,000 to £5,000.

The allowance for cash Isas will also be cut from £3,000 to £1,000 in April 2006.

The NMG survey reveals highest levels of disillusionment among the core market of Isa investors with 40 per cent of the respondents aged 45-54 saying they were less inclined to invest and 45 per cent of those aged 55-59.

Isis Asset Management head of communications and strategy Jason Hollands believes that a significant proportion of investors seem to have concluded that since the Government is no longer committed to Isas, they are no longer interested. Hollands says: “When Labour replaced Peps with Isas, these were heralded as a flagship part of Government policy to encourage private savings but the flagship increasingly looks like it is being torpedoed by its own side.”

Shadow Chancellor Oliver Letwin says: “This survey confirms what we have been saying for a long time. In seven years, the Chancellor has halved the savings rate in this country through a £5bn raid on the pension funds, a massive extension of means-testing, and big increases in taxes on savings.”

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