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‘Keeping Isa limit is not enough to encourage savers’

Investment experts say the Chancellor needs to do more than extend the existing Isa limits to 2010 to encourage long-term saving.

In his pre-Budget announcement, Chancellor Gordon Brown had agreed to consult on extending the existing £7,000 tax-free Isa limit for another five years to 2009 and Wednesday’s Budget extends that timescale by a year.

But Bestinvest business development manager Justin Modray says the removal of the 10 per cent tax credit on Isa dividends last year, coupled with the continued volatility of equity markets, has already been the death knell for equity Isa sales.

F&C communications director Jason Hollands is pleased the Chancellor did not lower Isa limits to £5,000, as had been suggested last year, but thinks he should have gone further by raising the allowance or at least opening up the possibility.

Brooks Macdonald director Alistair Butt says: “They acknowledge that there is a savings crisis but want to cap the tax-free savings opportunities for conservative savers at £3,000 a year. That is hardly an incentive to save.”

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