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Budget 2001 Wednesday, 7 March, 2001, 16:23 GMT
Budget boost for savers
Chancellor Gordon Brown has confirmed that savers will be able to put away 7,000 a year tax-free for another five years.

With an Individual Savings Account ( ISA), people can save up to 7,000 a year tax free - but this upper limit had been due to fall to 5,000.

In the pre-Budget report in November, the Chancellor announced that this would be extended to April 2006. Cash ISAs were also to be made available to young people aged 16 or 17.

Previously cash ISAs were only available to those over 18.

The confirmation of the move is part of government plans to encourage people to save more, hopefully leaving them better prepared for retirement.

Savings boom?

Under the rules for ISAs, savers can take out just one each year. That can be either a simple savings product, typically a building society account (a "mini-cash ISA"). Up to 3,000 can be invested in these.

Or it can be a more complex version which also allows them to invest in stocks and shares (a "maxi-ISA").

Nine million ISA accounts were opened in the first year, with 48bn now being saved, the Chancellor said.

"Because of the high number of ISAs, tax relief for savers will by 2006 exceed projected tax relief for PEPS and TESSAs by 800m a year, tax incentives for savings to total 3bn," the Chancellor said..

Not enough?

The announcements have had a mixed reaction from people in the savings' industry.

Clive Scott-Hopkins of Towry Law Financial Services described the budget as a "non event for the savings industry", as the measures announced did not contain anything new.

He pointed out that nothing had been done to simplify capital gains taxes. "It is just as onerous to calculate," he said.

David White, Chief Executive of Tunbridge Wells Equitable, however pointed out that the combined Child Benefit and the new Children's Tax Credit would give parents more money, which they could choose to save.


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11 Oct 00 | Business
08 Nov 00 | Business
31 Mar 00 | Business
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