Isas are to undergo a “groundbreaking” overhaul which will see the annual allowance go from £11,520 to £15,000, with cash and stocks and share wrappers merged under the one allowance.
The move come into effect from 1 July, creating “New Isas” or “Nisas”.
Individuals will be able to invest their whole annual allowance in cash, compared to present rules where only half of the £11,520 can be invested in cash and the rest in stocks and shares. The new allowance will also apply to current Isa savings.
The Junior Isa limit will also be increased from £3,720 to £4,000.
In his Budget speech, Chancellor George Osborne said: “Twenty four million people use Isas and millions of them would like to save more than the annual limits.
”I want to help savers by dramatically increasing the simplicity, flexibility and generosity of Isas.”
The Government also intends to include peer-to-peer loans within Nisas and will consult on how to do this later this year. It will also look at allowing investment in debt securities via crowdfunding platforms to be held in Isas.
Lowes Financial Management investment analyst Doug Millward says: “Anything which encourages people to save and invest more is to be welcomed – not only for individuals but for the economy as a whole. we feel the substantial increase in the annual limit is a good thing.
“We are also glad to see the merging of the cash and stocks and shares elements into a single Isa as this will simplify things for investors and provide much more flexibility.”
Close Brothers Asset Management regional head of advice Patrick Haines says: “This ground-breaking policy change should boost further saving as the economy improves and earners find they have just a little extra remaining at the end of the month.”