ISA allowance rises for the over 50s

Tuesday, 06 October 2009 08:21

The ISA cash allowance limit rises today (Tuesday 6 October) for anyone over 50 before next April.

The allowance for tax-free savings cash ISAs is rising to £5,100 – up by £1,500 – per tax year from today for those in the higher age group. The rest (under 50s) will have to wait until next April.

It’s not just cash ISAs whose limit is increasing; it is also the overall ISA limit which rises from £7,200 per year to £10,200, which includes stocks and shares ISAs (again, usually without tax on the interest). However, for every pound you save in a cash ISA, you lose a pound from your stocks and shares allowance.

The changes to ISA allowances were first announced by Chancellor Alistair Darling in the Budget in April 2009, and mean that – in nearly all cases – you can top-up an existing ISA, or open a new account with the new limit.

Research by Moneyfacts.co.uk – the financial website – shows that nearly all cash ISA providers are taking on board the new limit. Nearly – but not all.

One key exception is internet bank Egg, for whom a spokeswoman said: “Taking into consideration a number of commercial factors, we have decided to offer the new limit from next April.” It means that over 50s cannot benefit from the extra few months with Egg.

Other providers also have restrictions. For example, Nationwide will not allow you to top-up an existing ISA account to the new limit, so you would have to open a new account to take advantage of the extra savings potential.

Although most building societies and banks only allow you one ISA per person, Nationwide says it has been allowed to offer a second account to people who wish to save more, as long as the accounts are part of the same ISA “portfolio”.

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