90 per cent oppose ISA limit reductions

Government is out of step with savers on ISA limits, new poll warns.

13:08 01 November 2004

The bulk of the public opposes the Government's plans to cut tax-free savings allowances under Individual Savings Account (ISA) rules, a new survey claims.

The current limits for mini- and maxi-ISAs are 3,000 and 7,000 per year, respectively. Chancellor Gordon Brown plans to cut these to 1,000 and 5,000.

However, 90 per cent of respondents to a poll conducted by ICM for Intelligent Finance said that they believed that the current allowances were "about right" or "should be increased".

Heather Scott, head of communications Intelligent Finance declared, "far from simply being a tax-break for upper earners ISAs, and in particular mini-cash ISAs, have proved relatively popular with low to middle-income earners, the very people the government wants to encourage to save."

She added, " At Intelligent Finance we had 102,000 ISAs opened in tax year to April 2004."

More than 1.1 million savers from low to middle-income groups invested more than 1,000 in an ISA in the tax year to April 2004.

The average sum invested this year was 2,020, so the Chancellor's plans would have a profound effect on the ISA market.

"Some four million savers would be affected by the government's decision to lower the ISA limits", Ms Scott claimed.

Adrian Coles, director general of the Building Societies Association, told the Sunday Herald newspaper, "We are worried that the proposal to cut the tax limit on mini cash ISAs to 1,000 in 2006 will have a detrimental effect on these very popular savings accounts."