Savers Say No to Potential ISA Cap

Tax-efficient savings and investments may soon carry a lifetime allowance cap of £100,000, disincentivising thousands of Britons from investing in the stock market

Emma Wall 27 November, 2013 | 4:14PM

Next week the Chancellor will deliver his Autumn Statement - a chance to get a sneak peak of what to expect in next March's Budget. 

If the rumours are to be believed it will be bad news for savers and investors, as George Osborne may be announcing a lifetime allowance for ISA investments of just £100,000.

Tens of thousands of investors will already have reached this limit, dis-incentivising them from contributing further to the stock market, making long-term savings and ultimately, for those who have invested in domestic stocks, supporting the economic recovery.

Unsurprisingly, research from discount broker Willis Owen has revealed that savers are firmly against the rumoured cap on ISA savings rumoured to be under consideration by the Treasury. 

ISAs have seen significant inflows since the recession, due in part to Bank of England base rate being at a record low of 0.5% since March 2009, higher-than-target inflation and the Government's active promotion of the savings vehicle. 

In 2009 the annual ISA limit was raised above the £10,000 threshold, first for those aged 50 and over, and then for the remainder of the public. This £3,000 boost sent a clear signal to consumers to save more for longer - in contrast to the rumoured cap. 

Jason Chapman, managing director at Willis Owen, said that this about turn by the Government would be bad for UK businesses and the public. 

"ISAs have been one of the few real success stories in getting people in the UK to save for the future – we should be building on this success, not scaling it back," he said. We want the Chancellor to end the uncertainty around this and use his statement to confirm whether or not this is something the Treasury is looking at."

Susan Hannums Director at Savingschampion.co.uk  said that the possible ISA cap on savers at a time when savers desperately need all the help they can get added insult to injury.

"While the Government continues to work at ways to help borrowers, by keeping interest rates low and introducing the funding for lending scheme, savers have been hammered with record low interest rates and the funding for lending has decimated the competition in the savings market," she said.

"The one glimmer of hope, for taxpayers, is having some cash in a tax free environment so to restrict this at a time when they need it most seems unfair and unjust."

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Emma Wall

Emma Wall  is Web Editor for Morningstar.co.uk.