The bank’s research reveals the potentially huge impact on people’s savings and retirement planning from the Chancellor’s decision to cut mini-cash ISA allowances from £3,000 to £1,000 in the next financial year.
An individual putting £3,000 a year into a mini-cash ISA as opposed to the proposed new £1,000 limit would, over 20 years, earn an extra £30,000 of tax-free interest income*. This would rise to £82,000 in lost tax-free interest over 30 years and £180,000 over 40 years.
Research for Intelligent Finance casts doubt over the wisdom of reducing ISA allowances when so many people, including many low to middle income earners are already using ISAs to help boost their retirement incomes.
Commenting, Grenville Turner, Chief Executive, Intelligent Finance, said: “The Government says it is considering radical measures to help boost people’s pensions. It could start with a simple one – continuing to back a successful, simple product encouraging people from all incomes to save for the long term.”
Over 1.1 million ISA savers from low to middle income groups saved over £1,000 in an ISA in the last tax year and would be hit under Government plans.
9 out of 10 people who expressed an opinion believe the ISA tax-free allowance is currently about right or should be increased.
