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Nationwide: government should double cash ISA limit

The building society has called on the chancellor to align cash ISAs with stocks and shares ISAs, saying the move would help first-time buyers and pensioners.

 

by Michelle McGagh on Feb 28, 2013 at 14:00

Nationwide: government should double cash ISA limit

Nationwide building society has called for the limit on cash ISAs to be doubled to help first-time buyers and pensioners.

The building society, which is a big provider of cash ISAs, wants the chancellor in his Budget on 20 March to bring the current cash ISA limit in line with the stocks and shares ISA limit.

Equalisation of the ISA limits would mean savers could put £11,280 into a cash ISA. Currently cash ISAs have a limit of £5,640 compared to the £11,280 limit for stocks and shares ISAs.

Nationwide has said equalising the ISA limits would remove confusion, simplify saving and encourage people to save more. In particular it believes first-time buyers would be able to save more into a tax-free cash account when saving for a deposit. Pensioners and those coming to retirement would benefit from moving more of their savings into cash from equities in order to protect the value of their capital and give them certainty of consistent returns.

Richard Marriott, head of savings at Nationwide, said: ‘With many first-time buyers struggling to raise a deposit and with pensioners relying more on their savings income we believe this is the right time for the government to act on ISAs.

‘Increasing the cash ISA limit and equalising it with the equity ISA limit would simplify and bring about increased fairness to the entire ISA regime in a single stroke. Not only would it bring a much-needed boost to groups such as first-time buyers and pensioners, it would also send out the right message to all of Britain’s savers, that it is worth saving, no matter how much or how little, in cash or in equity.’

Around £390 billion is invested in ISAs in the UK, but Nationwide said less than half of people eligible for an ISA in the UK have one.

A report by the Post Office shows only 45% of the population have a cash ISA and just 57% plan to use the full cash ISA allowance this year. Another 22% plan to use their full allowance but 74% are unaware of the exact allowance.

Savers plan to invest an average of £2,737 before the end of the tax year on 5 April, according to the Post Office ISA saving report. By saving just 49% of the allowance they lose around £822 million of tax-free interest.

Henk Van Hulle, head of savings at the Post Office, said: ‘While it is encouraging to see a number of people fully using this tax-free opportunity, a significant number of people are losing out.

‘By doing some research people will be in a position to judge the best rates and their long-term value, and the ones that will make their savings work as hard as possible for them. Whether investing a lump sum or a little money every month, it all helps people’s hard earned cash go that extra bit further while avoiding tax on savings returns.’

Want to know more? See our ISA Guide. Cash ISAs won't give you the best long-term return so you might also want to read, 'Will poor cash ISA rates shock you into stocks and shares?'

12 comments so far. Why not have your say?

trieze

Feb 28, 2013 at 17:40

"The certainty of consistent returns" is certainly not what you get with the bonus payments taken away without reminders from the miserly below inflation rate received after one year.

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Pulpos

Feb 28, 2013 at 19:09

In a recent citywire article,it had already been suggested that ISA allowance should be raised to 30-40k p.y.This would be a great alternative/addition to build a pension.

Cash ISAs are at present time useless. Even Nationwide offers just 0.25% interest for an instant ISA!. Fixed Term ISAs offer around 1.5%! Who wants to invest in Cash ISAs?

The Gvt has inflicted great damage to honest/hard working savers by offering the Banks cheap Borrowing Funds of £ 65(or is it 85) billion. So Banks dont need Savers money now.

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Roger Savage

Feb 28, 2013 at 19:44

Here's a radical suggestion for the Nationwide - if it wants to help savers, perhaps it should blaze a trail with interest rates that represent rates that comfortabely clear inflation.

Of course, with 'Funding for Lending' (funding for the feckless) in place, savers have no chance.

Doubling up on the money that is subjected to being ravaged by a reduction in spending power would only be an attractive proposition to an idiot.

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Tony Peterson

Feb 28, 2013 at 19:57

Spot on, Roger Savage.

Unless cash ISA interest rates are above inflation, the product is a con, and the provider is stealing the tax break.

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Lyndy

Feb 28, 2013 at 21:47

They can tripple the cash ISA for all I care, I wont touch it with a barge pole.

No Baby boomer worth their salt will put money into a below inflation product Tax break or no tax break.

So keep it - I'm getting 6% at least on my savings and even if they are taxed its still more than I would get in an ISA. The rest of my money is abroad earning income - that way I also have a natural currency hedge . I dont plan on being a millionaire - I just need a comfortable life with a bit of security to settle into retirement when I feel like it. One of those jobless youngsters can take over my job as soon as I get enough income coming in - and I'll be glad to hand over the reigns.

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Lyndy

Feb 28, 2013 at 21:51

hey can tripple the cash ISA for all I care, I wont touch it with a barge pole.

No Baby boomer worth their salt will put money into a below inflation product Tax break or no tax break.

So keep it - I'm getting 6% at least on my savings and even if they are taxed its still more than I would get in an ISA. The rest of my money is abroad earning income - that way I also have a natural currency hedge . I dont plan on being a millionaire - I just need a comfortable life with a bit of security to settle into retirement when I feel like it. One of those jobless youngsters can take over my job as soon as I get enough income coming in - and I'll be glad to hand over the reigns.

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Adastra100

Mar 01, 2013 at 09:08

Another worthless idea except for the banks!

Anyone who can afford £11,280 cash must be a higher rate tax payer, so in the top 10% (?) of workers [but growing thanks to the State] so the benefitting population would be limited. 40% taxpayers would be much better off now to put the money into a SIPP, if they have no alternative pension arrangements, or a stocks and shares ISA which gives tax free growth and income in retirement. Cash ISAs only really offer liquidity and a pittance of an income.

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Anonymous 1 needed this 'off the record'

Mar 01, 2013 at 10:44

I agree completely Roger.

The rates offered by the Nationwide Building Society are pathetic.

This self righteous, Mutual equivilent of the Liberal Democrat Party, is a hypocritical disgrace.

I make it my business to vote against the chief executive's remuneration package each year.

I would advise you all to do the same.

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rik

Mar 01, 2013 at 21:48

I no longer utilise cash ISA's. It is a mistake to allow a 'tax concesion' to tie up funds that could be earning much more elsewhere.

To citywire, please stop automatically checking the email box below, it is in danger of resulting in all your emails being regarded as spam.

I will choose if I wish!

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Pike Bishop

Mar 02, 2013 at 19:58

Remove any cash that you do not intend to use in the forceable future, say the next 12 months, and place it in a low cost income fund on one of the fund platforms. Fidelity funds, Hargreaves Landsdown etc.

Building societies have been robbing savers for years. Stop subsidising the BTL industry.

Lets see the real cost of borrowing.

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Tony Peterson

Mar 02, 2013 at 20:14

Why has it taken so long for people to wake up?

When cash ISA rates fell through the floor in 2009 we switched to defensive equities. Result: capital almost doubled, effective returns on initial investment around 14%. Don't say I didn't tell you. I did.

It looks like the Savers' Strike I predicted is only now starting to come to pass.

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TonyN

Mar 03, 2013 at 13:31

While I think this is s good idea, and should be done IN ADDITION to the Stocks and Shares ISA limits, I agree with all the above comments - all this would currently serve would be to give savers marginally less below inflation that they are getting now.

Mortgages are 4-5%, loans are 7-15%, credit cards are 15-25% - so how are savings 2-2.5% at best, and 0.1% at worst?

Someone is making a shit load of money, and it's not savers, and it's not the government in tax.

Nationwide should be leading the way, and while being near the best does not make any of the rates good enough.

That's where to start Mr Marriott, tax savings on top would be a nice to have extra.

Tony

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