Isa limit rises for the over-50s

Individual Savings Accounts have proved popular with savers

A change enabling millions of savers aged over 50 to increase the amount deposited in a tax-free Individual Savings Account (Isa) has come in.

The amount people can save in an Isa has now risen from £7,200 to £10,200, of which half can be saved in cash and half in stocks and shares.

The new limit, which was announced in this year's Budget, is for anyone born on or before 5 April 1960.

For everyone else, the limit will rise from 6 April 2010.

"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.

Change

Isas were introduced 10 years ago by then-chancellor Gordon Brown in an attempt to encourage UK residents to get into the savings habit.

The new rules...present investors with a bigger Isa opportunity than ever before

Rob Fisher, Fidelity International

Guide to the new Isa limits

Now there are about 19 million Isa account holders in the UK, with five million using the full allowance each year.

Investors can open one cash Isa and one stocks and shares Isa each year and various providers are offering different options for those aged 50 and over to top up their existing Isas.

Some will allow a top-up to variable-rate Isas, but not to fixed-rate products. Others will allow fixed-rate top-ups because the change is considered an "exceptional circumstance".

Other providers will allow people to open a parallel extra Isa, where they can save up to the extra £1,500 cash allowance, but the interest rate will be set at the level offered on the day - not the level offered earlier in the year.

"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," said Rob Fisher, head of personal investments at Fidelity International.

"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."