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ISA Allowance levels
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# 1
Renfro
Old 22-11-2008, 3:04 AM
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Question ISA Allowance levels

I'm new to this ISA malarkey and only opened my first cash ISA just over a month ago (putting in the full 3,600 allowance for 2008/2009).

I'd like to know how much I will need to set aside for next April, but I don't know what the limit will be for 2009/2010.

Does the ISA allowance level go up every year, or was the increase last year an exception?

The current allowance limit is quite paltry, so I'm hoping that it's not going to stay stuck at 3,600.
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# 2
jamesd
Old 22-11-2008, 7:32 AM
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It was an exception. There are some advocating that it be increased during the pre-Budget report. We'll see.
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# 3
Baldur
Old 22-11-2008, 9:30 AM
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Quote:
Originally Posted by Renfro View Post
The current allowance limit is quite paltry, so I'm hoping that it's not going to stay stuck at 3,600.
The previous limit (which was static from the introduction of ISAs in April 1999) was 3,000 - until it was increased in April 2008.
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# 4
Renfro
Old 22-11-2008, 1:25 PM
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Thank you very much for your replies.

Well that certainly explains why I couldn't find a list of historical ISA allowance rates when I was searching online. Originally I thought the ISA allowance might increase annually (in a similar way to income tax personal allowance).

I do have to admit that I thought the concept of ISAs was pretty lame to begin with (given all the restrictions, difficulty of transfer and currently poor interest rates) but this news just makes it seem even more pointless.

I was astonished to read in Baldur's post that, prior to the increase last year, the rate had been fixed since 1999 (Last century! - lol).

If they do the same again for the next 9 to 10 years, the allowance won't be worth jack (given that it's pretty pathetic even by today's standards).

I did see an article suggesting that the ISA allowance might be increased in the PBR, but given that Gordon Brown just wants people to be as recklessly profligate as he is, (increasing their spending whether they can afford it or not) I doubt the Government will end up doing anything that encourages saving or financial prudence.

Last edited by Renfro; 22-11-2008 at 1:27 PM.
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# 5
dunstonh
Old 22-11-2008, 1:45 PM
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Quote:
I do have to admit that I thought the concept of ISAs was pretty lame to begin with (given all the restrictions, difficulty of transfer and currently poor interest rates) but this news just makes it seem even more pointless.
There are very few restrictions. They are easy to transfer (only a few providers dont do that) and interest rates have been typically better than normal savings accounts.
Quote:

I was astonished to read in Baldur's post that, prior to the increase last year, the rate had been fixed since 1999 (Last century! - lol).
No surprise. When they were introduced they were originally set for a 10 year period with a review in year 8. That took place.

Quote:
If they do the same again for the next 9 to 10 years, the allowance won't be worth jack (given that it's pretty pathetic even by today's standards).
7200 over 10 years is 72,000. Thats not to be sniffed at. Plus, if you go back to include PEPs, Tessas and the previous 9 years of ISA then you can have hundreds of thousands of pounds in ISA now.

Quote:
I did see an article suggesting that the ISA allowance might be increased in the PBR
Unlikely. The Govt needs people to be spending, not saving at this time.
I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
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# 6
masonic
Old 22-11-2008, 2:33 PM
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Quote:
Originally Posted by dunstonh View Post
...interest rates have been typically better than normal savings accounts.
That's certainly true for anyone who receives their interest net of tax. However, my recollection is that even the better instant access savings accounts have paid a higher gross rate of interest than the best cash ISAs. That's why we tend to see queries from non-taxpayers wondering if it's worth them using ISAs.
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# 7
guli
Old 22-11-2008, 9:03 PM
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Quote:
Originally Posted by Renfro View Post
Thank you very much for your replies.

Well that certainly explains why I couldn't find a list of historical ISA allowance rates when I was searching online. Originally I thought the ISA allowance might increase annually (in a similar way to income tax personal allowance).

I do have to admit that I thought the concept of ISAs was pretty lame to begin with (given all the restrictions, difficulty of transfer and currently poor interest rates) but this news just makes it seem even more pointless.

I was astonished to read in Baldur's post that, prior to the increase last year, the rate had been fixed since 1999 (Last century! - lol).

If they do the same again for the next 9 to 10 years, the allowance won't be worth jack (given that it's pretty pathetic even by today's standards).

I did see an article suggesting that the ISA allowance might be increased in the PBR, but given that Gordon Brown just wants people to be as recklessly profligate as he is, (increasing their spending whether they can afford it or not) I doubt the Government will end up doing anything that encourages saving or financial prudence.
Inflation is low the past 9 years and should be low as well next year, so the allowance in real terms is not too bad.
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# 8
masonic
Old 22-11-2008, 9:12 PM
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Quote:
Originally Posted by guli View Post
Inflation is low the past 9 years and should be low as well next year, so the allowance in real terms is not too bad.
IMHO the allowance was low to begin with.
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# 9
apt
Old 22-11-2008, 9:22 PM
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The cash ISA allowance was more generous than the Tessa which preceeded it which was limited to a total of 9,000 over five years. I can't see it rising much ahead of inflation as it effectively costs the Treasury more each year. But it would probably anger too many voters if the government were to scrap this tax break.
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# 10
dunstonh
Old 22-11-2008, 9:22 PM
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Quote:
Originally Posted by masonic View Post
IMHO the allowance was low to begin with.
Of course, it was meant to be even lower. Had the original plan gone through with the cash ISA being some sort of green shield stamps style scheme where it was retailed through the supermarkets, it would have stuck at 1000
I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
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