Budget links ISA limits to retail price index

The Budget has proposed to increase ISA limits in line with the retail price index (RPI) from next April.

Currently the annual ISA subscription limit is £10,200, of which £5,100 can be saved in cash.

From 6 April 2011 the limit will be linked to RPI, but rounded up to a multiple of 120 to make monthly saving calculations easier. The cash limit will be half the value of the stocks and shares ISA limit.

In the event that the RPI is negative ISA limits would remain unchanged from the previous year.

Director general of the Tax Incentivised Savings Association Tony Vine-Lott, said the move would give people more security and offered an attractive alternative to pensions.

‘It's something we’ve been pushing for some years.’ he said. ‘They are saying people are using ISAs to plan for financial security and that’s hard to do if the government keep meddling, so it will give people far more security for their savings.’