In Wednesday’s Budget, Chancellor Alistair Darling set out a rise in the Isa allowance to £10,200 for people aged over 50 from October 6 this year and next year for all other savers.
The £3,000 allowance increase from £7,200 follows last year’s £200 increase and will enable savers to hold £5,100 in cash.
Technology and Technical founder and director Kim North says the requirement to verify age on Isas will prove a significant burden as £290bn is held by 18 million Isa investors.
She says: “Will providers be fined if they give someone ineligible the full allowance and the whole Isa rendered as not valid? Does the responsibility lie with the product provider or with the client and do the administrators chase the information on date of birth?”
Skandia head of tax and financial planning Colin Jelley welcomes the increase but says the age cap will add complexity. He says: “Why do over 50s warrant a higher allow-ance for six months? Why not make it £10,200 for everybody at the same time.”
North says the age limits will create a generational push of money upwards, contrary to traditional financial planning where it has filtered down to the younger generations who had more attractive tax breaks.
She says: “Now, all of a sudden, anyone with sense is going to hand the money to parents and grandparents over 50.”
Whitechurch Securities managing director Gavin Haynes says: “The whole age call on Isas just seems completely unnecessary. We welcome the increase, although it is overdue, but it seems to be something of a spin to attract elder voters.”
But Hargreaves Lansdown investment manager Ben Yearsley does not believe the age-cap will be problematic. He says: “People should be looking at this as an opportunity for increased investment.”