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Cash ISA shake-up as limit increase set for April

Cash ISA shake-up as limit increase set for April

Category: Savings

Updated: 04/04/2011
First Published: 15/10/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The maximum amount that can be saved in an Individual Savings Account (ISA) is set to increase by £480 in April next year.

It was announced in this year's Budget that the average ISA allowance will rise in line with inflation as measured by the Retail Prices Index (RPI) in September of the preceding tax year.

With the Office for National Statistics this week revealing RPI to be 4.6% for September, it means savers can expect to see the current ISA limit of £10,200 rise to £10,680 from next April.

Savers into a cash ISA will be permitted to invest a maximum of £5,340 tax-free, up from the present limit of £5,100.

The news comes shortly after it was revealed that UK savers could be losing up to £49 million by failing to use their entire annual ISA allowance.

That is the figure which Halifax has calculated cash ISA savers who topped up their accounts in the first half of the tax year will miss out on unless they use the rest of their allowance in the second half of the year.

Halifax also recently became the first bank or building society to agree to pay interest to savers who transfer their cash ISAs over to them from the day the transfer application form is received.

An investigation by the Office of Fair Trading (OFT) into the cash ISA market earlier this year found that switching a cash ISA takes on average 26 calendar days, with a quarter taking longer than 30 days.

During this period, customers switching their cash ISA to a better rate currently earn the lower rate paid by their existing provider.

The OFT also found that there can be a gap of up to five days during which interest is not accrued when consumers transfer their cash ISA.

To close the ISA interest gap, Halifax has pledged that all customers switching their existing cash ISA to them will now earn interest from the first day their completed application form is received either in branch or by post.

This means that customers switching to a better interest rate will not be disadvantaged by the time taken to transfer their cash ISA from their current provider.

If you have a cash ISA, why not take the time to see whether you could be earning a better rate of interest elsewhere.

Our cash ISA best buy charts are there to give you the run down on all the latest and greatest cash ISA deals currently available.

Amongst the famous names currently having a big say in the market are Halifax, Chelsea Building Society, Barnsley Building Society and Nationwide.

Find the best savings rates for you - Compare savings accounts

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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