It was expected the Government would help beleaguered savers as plummeting interest rates have destroyed returns on cash.
The Chancellor’s response was to increase the annual Isa allowance from £7,200 to £10,200. Of this, the amount that can be invested in cash will rise from £3,600 to £5,100. To help older savers, who often rely on interest to supplement their pension income, the new limits will apply in this tax year for those 50 and over. Younger savers will have to wait until April next year. Con trick: David and Debra Cooke say they have seen monthly income on their savings destroyed But to give providers time to adjust their systems, deposits above the current Isa allowance for the over-50s will be accepted only after October 6, 2009. Older savers able to save the full £5,100 from October 6 in a cash Isa will get a rather pitiful boost of slightly more than £5 over six months if they are basic-rate taxpayers. This represents the tax saving on interest based on a top-paying cash Isa at 3.56 per cent. David and Debra Cooke from Sheringham, Norfolk, have Isa savings with a variety of banks and building societies, but they were disappointed with the changes, even though as they are both in their 70s they will benefit sooner than most from the new Isa limit. ‘It’s a con trick,’ says David, 76, a retired industrial relations director. ‘Any boost in income from Isas is over a year away and the tax benefit is minimal anyway. There is nothing in this Budget for people who want regular monthly interest on savings at a good rate. We have seen the monthly income on our cash savings destroyed in the past six months. What we need now is for savings rates to improve dramatically.’ Homeowners with little equity who are struggling to remortgage to low fixed rates received some good news as Darling confirmed that £20billion of Government-backed mortgages would be made available through State-owned banks such as Northern Rock, Lloyds TSB and NatWest. It is hoped this cash will help to provide deals at competitive rates for borrowers with ten per cent or less equity, many of whom are shut out of the mainstream market.
This includes borrowers such as local government officer Suzanne Lammiman, 33, and her partner Matthew Kyle, 26, a lorry driver, who had difficulty finding an affordable mortgage when their fixed-rate deal came to an end two months ago.