Budget 2014: Will ISA changes turn Britain into savers?

Changes to ISAs have been welcomed but only time will tell if they can get Britain saving again.

Chancellor George Osborne announced significant changes to ISAs (Independent Savings Accounts) in his 2014 Budget.

Savings levels are at their lowest levels for thirty years, so many people have been calling for measures to encourage us to save.

25 million of us already have ISA, or individual savings accounts, which allow you to save free of tax.

At present you can save up to £11,520 in a stocks and shares ISA, £5,760 in a cash-only ISA.

From July 1st, instead of cash ISAs and stocks and shares ISAs, with limits there will a single product, the ‘New ISA’ (NISA) and all existing ISAs will become a NISA into which you’ll be able to put £15,000.

Investors will also be able to transfer their investments from a stocks and shares ISA to a cash one and vice versa.

Robin Fieth, Chief Executive of the Building Societies Association said: “The Chancellor has listened and we are delighted that he has done exactly what we have been calling for: increased the limit delivered a single allowance which no longer penalises savers who want to invest in cash.

“This will benefit many mid and lower income savers, especially those nearing retirement.”

His welcome was echoed by Andy Caton, Yorkshire Building Society’s Chief Corporate Affairs Officer.

He said: “Changing the rules on ISAs is tremendous news for savers and deals with an area of the economy that many of us have been crying out for reform on for years.

“Introducing a larger tax-free allowance and removing the distinction between cash and stocks and shares ISAs incentivises the savings habit and massively widens the options for those who already put money away.”

Others point to the fact that it will do little to help the many people who say they cannot afford to save at the moment, with all their available income going on essential outgoings.

Jafar Hassan, personal finance expert at uSwitch.com said: “Today’s announcement is a real crowd-pleaser for savers ahead of next year’s election.

“However, while this is great news for the one in three Brits who plan to use their full ISA allowance this year, the government still needs to do more to help the 19% of consumers who say they can’t afford to save into an ISA.

“With average earnings standing at just £26,500 per annum, I would question the number of savers that can afford to save £15,000 per tax year.

“Plus, with interest rates at an all-time low, anyone who does save the full amount only stands to gain an extra £25 or so in tax free savings.”