ISA rush prompted by new rules and allowances with brokers reporting surge in interest

News - Savings

Written by Ray Clancy

Thursday, 22 April 2010 10:00

ISAs are a more attractive investment thanks to new rules and investors have been rushing to take advantage of them, according to various experts.

Despite rates remaining low, with the average top ISA rate down almost 0.5%, the new tax year has seen a surge in applications. The number of applications for an ISA went up by 52% in the first three days of the tax year, according to financial services provider Fair Investment.

Comparison site moneysupermarket.com said it saw a 34% increase in savings traffic during the first few days of ISA season, compared to the same period last year.

‘Making the most of your money is more important than ever when rates are struggling against inflation. Although this year, the rates on offer have been lower than we would have hoped, with very little movement expected in the market, savers would be better off taking out a product now to start accruing the interest immediately rather than waiting for a better deal at a higher rate. The large volume of traffic we have seen in April, suggests many savers have the right idea,’ said Kevin Mountford, head of banking at moneysupermarket.com.

New rules governing ISAs has made the investment option more meaningful, according to Martin Bamford, chartered financial planner for Informed Choice. ‘The old allowance level meant it would take years of contributions to build a sizeable fund. Under the new rules, a couple can shelter over £40,000 of their investments from tax within a couple of weeks at the end and start of the tax year,’ he explained.

At the beginning of April, new rules meant that an additional £3,000 has been added to ISA limits, bringing the total amount to over £10,000, he added and this should encourage more people in the UK to save. Britons are more inclined to save their money with an ISA investment to maximise their efforts to avoid taxation.

According to broker Willis Owen, the company has seen a 14% cent rise in people investing in ISAs on the last tax year and up 24% on the 2007/2008 tax year with a third of its customers investing in the full limit.

‘Investors know that tax rises are on the way whatever party forms the next government. So those with the cash to invest now are right to secure the full ISA allowance as soon as possible,’ said Alan Easter, director of the firm.

‘The early birds are also looking for an income from their investments. With returns still relatively low on the high street it is no surprise that savers are looking for an alternative home for their money,’ he added.