Moneynet slams government for ‘headline-grabbing’ with ISA increase

The increase in ISA allowances for the over-50s was simply a headline-grabbing attempt by the government that will have little effect on the finances of older savers, Moneynet.co.uk said this week.

Since 6 October, over-50s have been allowed to save A?5,100 per year in their Cash ISA rather than A?3,600.

Moneynet.co.uk calculated that the average benefit of the increase for basic rate tax payers will be just A?4 in extra interest earned.

“It was a great headline grabber at the time [it was announced], but we’re not talking about a life changing sum of money here,” said Andrew Hagger, Moneynet.co.uk spokesperson.

“You have to question if it was really worth it and whether it would have been better to have waited until the new tax year when everyone will benefit.

“Whilst ita��s important that people are encouraged to save at every opportunity, perhaps the real financial impact of this move should have been given a little more thought.”

According to Hagger, banks had to retrain staff, adapt IT systems, and change promotional materials to reflect the increased ISA allowance.

The calculations of extra interest assumed savers used the full A?1,500 increase in an ISA account carrying an AER of 3%.

From 6 April 2010, the increased ISA allowance will apply to all savers.

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