The Joy of Saving ISAs Set to Rise

Isa limit to rise but a third of Britons could not survive to weekend on the amount held in their savings accounts.

 The Isa limit is set to increase by £470 from £10,200 to £10,670 next year in line with inflation.

The Government has yet to officially announce the new Isa allowance for the 2011/12 tax year, but it is due to increase in line with September’s retail prices index of 4.6 per cent, which would take it to £10,670.

The news of the increased Isa limit comes as research suggests that nearly a third of UK adults could not survive to the weekend on their instant access savings accounts.

The survey by HSBC indicates that 30 per cent of Britons have put aside less than £249 as a financial safety net, which is the equivalent of five days average take home pay. In order to cover bills and other costs in the event of a financial emergency, experts recommend that people keep a financial cushion of three months’ take home pay - or an average £4,683.

The research also found that a fifth of adults had no savings at all. Those aged between 25 and 34 are the least prepared for a financial emergency, as 41 per cent of people in this age group have less than £249 saved and 25 per cent have nothing at all.

Women are less financially prepared than men, as 33 per cent of women have less than £249 in savings, while 26 per cent of men have less than this amount in savings.

Looking at the UK as a whole, people in the North West were the least likely to have a financial cushion in place as 25 per cent had no safety net at all.

Richard Brown, head of savings for HSBC said: “These findings demonstrate a worrying lack of preparation amongst UK residents. With the current climate of uncertainty, it is of utmost importance that people are setting aside a realistic sum of money to be used in emergencies.”

Rob Fisher, head of personal investments at Fidelity Investment Managers, urges savers to make full use of the increased Isa allowance.

He said: “A couple will be able to save £21,340 per year in their Isas and enjoy tax free returns.

“With rising taxes, savers and investors really should make sure they put as much as they can in their Isa each year. Over 42 per cent of the UK population is still not taking up their Isa allowance. Isas are an all year round use-it-or-lose it tax perk and a perfect way to avoid giving hard earned money straight back to the tax man.”