ISA Allowance increase for 50+ UK savers

As of 6 October, millions of savers aged 50 and over will be able to increase the amount of money they put away into tax-free Individual Savings Accounts (ISAs).

The changes were announced in the chancellors 2009 Budget in July this year.

Before today, the annual ISA allowance for all UK savers was £7,200, of which a maximum of £3,600 could be deposited into a cash ISA. The limit has now risen to £10,200 for many, with up to £5,100 that can be put into a cash ISA and the remaining into an investment ISA, or the full £10,200 into an investment ISA.

All savers aged under 50 must wait until the new tax year - 6 April 2010, before being able to take advantage of the new limits.

"I am determined to help savers, because while low interest rates have helped millions of homeowners, I also know that they have hit those who rely on their savings to get by," said Chancellor Alistair Darling.

ISAs were introduced by then-chancellor Gordon Brown 10 years ago in an attempt to encourage UK residents to save more.

Today there are around 19 million UK savers with an ISA account, five million of which invest the full allowance each year.

Savers are only allowed to open one cash ISA and one stocks and shares ISA per year. ISAs have become a very popular savings method, so to keep up with demand there are a number of banks and building societies offering accounts, each providing different options and different rates. Many providers are offering savers aged 50 and over the chance to top up their existing ISAs.

Some providers are allow customers to top-up variable-rate ISAs, but not to fixed-rate ISAs, while others will allow fixed-rate top-ups as the change is considered an "exceptional circumstance".

Other providers have agreed to let savers to open a parallel extra ISA, allowing them to bump their savings up by an extra £1,500 cash allowance, but the rates offered will reflect the level offered on the day - not the rates that were previously set when the account was originally opened.

Rob Fisher, head of personal investments at Fidelity International said: "ISAs have been around for several years now, and while they are widely understood, we believe some lingering perceptions remain that quite simply stop some investors taking advantage of the benefits that are theirs for the taking,

"The new rules coming into effect now, and the subsequent changes which are set to happen at the start of the new tax year, present investors with a bigger ISA opportunity than ever before."