2 weeks Ago By Nicholas Dawson
A banking group boss has called for the ISA allowance to effectively be doubled with a £20,000 for cash savings and another £20,000 allowance for stocks and shares. You can currently deposit £20,000 into ISAs, and this allowance can be split across different types of ISAs, such as cash, stocks and shares and a Lifetime ISA. The accounts are tax-free, with no tax to pay on any interest earnings or investment growth within an ISA wrappe.
There have been reports that Chancellor Rachel Reeves was considering bringing in a new limit on cash ISAs, so you can only save £4,000 a year into this type of ISA. But leaders at Kroo Bank have urged Labour to change its policy in the other direction, to open up more savings options for Britons. Danny Haynes, chief product officer with the bank, said: "Our view is that we shouldn’t discourage people from saving, but instead improve the offer.
"The Government could create a £20,000 cash ISA allowance, and a £20,000 stocks & shares allowance. We should be doing everything we can to encourage people to 'put their money to work', and high yield tax-free savings are a great way to do that." He pointed to Bank of England figures that suggest more than £1trillion of Britons' savings are in accounts paying 2% or less.
This includes £250billion of cash earning to interest at all. Mr Haynes warned that having such a large amount of cash just sitting there hurts individual people's prospects and is a drag on economic growth. He warned: "This money is functionally ‘lazy’, and its owners will actually lose value over time due to inflation.
"This makes wealth growth difficult, especially in times of economic stagnation, leaving people unable to pursue their life goals. Cash ISAs, when at their best, are a simple and effective way of saving. It is vital that they are protected.
" The bank expert also said the current banking system needs to be improved, as savers often sign up for a good rate which then drops after a few months. Mr Haynes said: "Consumers then often face difficult processes if they want to move their money out to other providers with better rates. "Enforcing easier, and more efficient means of transferring ISAs would help increase competition.
Additionally, if the Chancellor is considering encouraging growth through Stocks & Shares ISAs, increasing the annual allowance would send a positive signal to providers - which in turn could help promote the adoption of ISAs further amongst the population." Another bank expert calling for improvements to ISAs is Sally Conway, savings expert at banking group Shawbrook . She said: "We should be making ISAs more flexible and easier to understand.
"Recent changes have opened the door to greater choice, and there’s an opportunity now to build on that – by simplifying the system and making it work better for more people. "The last thing we want is for savers to feel penalised for being sensible with their money – or to see choice reduced just when it matters most.".
