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BUDGET 2010: Experts query Isa increase

Advisers and industry experts have questioned the decision by Chancellor Alistair Darling to increase the Isa allowance in line with inflation.

Darling confirmed in the Budget that the average Isa allowance will rise in tandem with September’s RPI for the preceeding tax year, as well as confirming that from next month the annual Isa limit will rise from £7,200 to £10,200 for all savers, of which half can be saved in cash.

Skerritt Consultants head of investments Andy Merricks believes the move is a waste of time.

He says: “What is the point if Isas rise nominally according to inflation figures? I am also fearful that Isas could end up with an index linked tag, which I do not think would encourage investment by savers. I hope the Government looks at this and decides to annually adjust to make sure the move is not pointless.”

Hargreaves Lansdown investment manager Ben Yearsley says although the increase is welcomed, nominal increases from inflation would be a bane.

“The key will be to do the rounding sensibly so you would want it to be £10,400/£10,600. Nominal increases would end up becoming a nuisance for advisers.”

CandidMoney.com founder Justin Modray says that if RPI were to stay at its current annual level of 3.7 per cent, the average Isa limit would rise from £10,200 this year to £10, 560 for the following tax year. However, he warns that there are concerns on the horizon.

“What if we enter a period of deflation? That surely is a realistic scenario that would see the Isa allowance frozen. That would make the move by the Chancellor nothing more than a damp squib.”

Bestinvest senior adviser Adrian Lowcock says: “I believe inflation has peaked this year and is likely to fall so I would expect the actual increase to be lower than £10,560 in September.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. I have read with interest the above especially as I had also watched the interview on GMTV this morning with Alistair Darling. He was specifically asked about personal tax allowances and his assertion that the reason he had not increased allowances this time round was because inflation had actually dropped. That being the case why then didn’t hre leave the ISA rate as was. If he is going to play by a rule of thumb at least be consistent!! I also though do believe he should have done more to encourage savings and irrespective of inflation/RPI the only way we will get this country on its feet again is to get cash into the system from savers.

  2. Another way to get cash in to the system is to get out of bed in the morning and not watch TV!.

    ps. Jeremy Kyle – never miss it. A lot of the characters on there are VERY familiar……

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