With all the publicity about the changes concerning access to individual pension pots, it would be easy to overlook the other savings initiatives the chancellor made in the recent budget.
From July 1, the individual Savings account (ISA) annual limit is raised to £15,000.
To put this in context, PEPs, the predecessor of ISAs had a limit of £6,000 in 1997. To this could be added a “single company PEP”, worth another £3,000. Also, a TESSA (Tax Exempt Special Savings Account) was available, worth £9,000 over 5 years. So, an average of £10,800 could be invested in tax-efficient savings each year.
This year, the annual ISA limit is £11,520, so we haven’t made much progress in savings in 17 years.
Now, at last, a sizeable increase is to take place from July.
So, the 2014/2015 Tax Year ISA allowance will start from April 6, at £11,880 and then increase to £15,000 on July 1.
Saving is a habit best learned early. So I welcome the increase to Junior ISAs, also from July 1. It will now be £4,000 per annum. The same goes for Child Trust Funds, for those who qualify.
The main point is, if affordable, these are ideal ways of building up savings for your little darlings. Hopefully, they will catch the savings habit from you, and it will benefit them for the rest of their lives.
One last point about ISAs. Why not invest now, at the start of the Tax-year, instead of scrambling to get your application in next March? You will then have the tax advantage for longer. Also, you can, of course, save on a monthly basis.
Another freedom announced by the Chancellor was that Cash and Stocks and Shares ISAs would be merged into one.
At last, some sense and encouragement for savers.
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