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The Chancellor's announcement that the annual limit on ISAs is to be increased from £7,200 to £10,200 has been widely greeted as good news.
The director general of the Tax Incentivised Savings Association, Tony Vine-Lott, said the Budget move 'sends out exactly the right signal and should encourage more saving.
'Crucially it’ll provide increased flexibility for those who want to use ISAs to save towards retirement. I’m particularly pleased that... the allowance should be divisible by 12 so as to simplify regular monthly payments and that half of the ISA can be in cash.'
The Association of Investment Companies (AIC) welcomed the limit increase as a 'meaningful amount'.
'Long-term, [it] will help to encourage the much-needed higher levels of saving that we need to see in the UK,' said AIC director general Daniel Godfrey.
His counterpart at the Building Societies Association (BSA), Adrian Coles, said it was 'disappointing' that savers under the age of 50 will not be able to benefit from the increase until April 2010.
People aged 50 and over will be able to save at the higher rate with immediate effect.
Mr Godfrey added that the Government must 'address some of the inconsistencies between cash ISAs and stocks-and-shares ISAs. The BSA would like to see transfers from [the latter to the former] to be permitted.
'The current one-way-only transfer... means consumers cannot rectify errors of bad judgement or advice and still retain their tax exemption.'
Carolyn Steppler, associate partner in personal tax at KPMG, added a note of caution: 'Any incentive to save is welcome, but I am afraid that the raised ISA limits will not create any overnight millionaires.
'An extra £1,500 allowance from 6 October on a cash ISA paying 3% will give extra income of £22.50 over the rest of the tax year, meaning a saving of just £9 for a 40% taxpayer - although, from 2010-11, top-rate taxpayers will save £11.25'.
