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ISA limit ‘should be raised to £8000’, the Chancellor is told

The Chancellor has been told that in order for savers to receive the same amount interest on their savings as was available a year ago, the cash ISA limit would have to be raised to in excess of £8000.

Interest rates on savings have collapsed over the last 12 months, with the Governments Funding for Lending scheme bearing the brunt of the blame from many, and the ‘best buy’ 12 month ISA rate currently stands at just 2.25pc. Compare this to the 3.25pc of a year ago, and you see that the top rate has fallen by some 33pc.

However the current plans for the cash ISA for tax year 2013-2014 are to raise the limit to just £5760. This equates to a rise of just 2.1pc, which is still 0.6pc below that of inflation.

Andrew Hagger, a savings expert from said: “The ISA allowance would need to be increased by more than 20 times the planned £120 rise to enable savers to earn enough to earn the same interest return (as a year ago)”

Interest rates on savings have been hit by a combination of events, all of which have hampered their worth. These include rising inflation brought on by increased quantitative easing, the Funding for Lending scheme launched by the Government in 2012, and less demand for savings products as disposable income is squeezed by stagnant wages and rising utility costs.

Many will be hoping that increased pressure on the Government to step in and help savers out will mean that, even though this budget did not deliver the desired results, it will certainly be something higher on the priority list of the Chancellor in the future.

Despite all of this, ISA’s do still have a range of advantages and should be taken advantage of if your finances allow it. For more information please see our 5 reasons to take out an ISA blog

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