Over-50s will be able to put aside up to £3,000 extra in tax-free savings from today, as new ISA allowances come into force.

The amount people can save in a tax-free ISA has risen from £7,200 to £10,200, of which half can be saved in cash and half in stocks and shares. The new limit applies to those born on or before 5th April 1960. Younger savers will have to wait until 6th April 2010.

The new limits, which were announced by Chancellor Alistair Darling in this year’s budget, are designed to help savers who have been hit by the steep drop in interest rates.

“I am determined to help savers, because while low interest rates have helped millions of homeowners, I also know that they have hit those who rely on their savings to get by,” he said.

Around six million people over 50 who save money in an ISA stand to benefit from the changes.

ISAs were introduced 10 years ago by Gordon Brown when he was chancellor in a bid to encourage Britons to save.

Around 19 million people currently hold an ISA, with five million using the full allowance each year.

Savers may open one cash ISA and one stocks and shares ISA each year. Ordinarily, investors may not increase the amount they pay into their tax-free savings account during their fixed term. However, many banks and building societies have introduced special rules allowing people to top up their existing fixed-rate ISA, or open a new bond alongside their current one, where they can save up to the extra £1,500 cash allowance.

“ISAs have been around for several years now, and while they are widely understood, we believe some lingering perceptions remain that quite simply stop some investors taking advantage of the benefits that are theirs for the taking,” said Rob Fisher, head of personal investments at Fidelity International.

“The new rules coming into effect now, and the subsequent changes which are set to happen at the start of the new tax year, present investors with a bigger ISA opportunity than ever before.”

This entry was posted on Tuesday, October 6th, 2009 at 9:39 am and is filed under Banking, Savings, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.