ISA allowance increase confirmed ahead of the spending review Go compare with our comparison table

ISA allowance increase confirmed ahead of the spending review

18 October 2010 / by Paul Dicken

The ISA allowance limit will go up to £10,680 from April 2011, quelling fears that ISAs could be a victim of the Comprehensive Spending Review.

The total allowance for the scheme will be linked to September’s Retail Prices Index (RPI) rate which was 4.6 per cent; this will be rounded-up to the nearest £120, making the increase 4.7 per cent for next April.

The Treasury confirmed the increase on 15 October, which follows the announcement in the June Budget that the ISA allowance would be linked to inflation.

Half of the ISA allowance can be invested in a cash ISA account paying tax-free interest, from next April the maximum that can be invested in a cash ISA will be £5,340.

ISAs allow investors to save a certain amount each financial year tax-free. The full ISA allowance can be invested in shares or half can be invested in cash, and the remainder in a stocks and shares ISA investment.

The coalition government received a boost ahead of the Comprehensive Spending Review (CSR) due to take place on 20 October, after the economic research house the Ernst & Young Item Club published its quarterly forecast.

The forecast said that CSR would help reduce uncertainty and stimulate business investment, which is forecast to increase by 1.8 per cent this year and by as much as 9.0 per cent next year.

Chief economic adviser, Peter Spencer, said: “Wednesday’s announcement should peel away another layer of uncertainty from the economic outlook and encourage businesses to loosen the purse strings, in much the same way that the formation of the Coalition government and the June Budget did earlier this year.”

Spencer did warn that a lot still hung in the balance for the UK economy, with much of the recovery dependent on the extent to which businesses can increase their overseas income flows as the home market stagnates.

Spending plans criticised

In a speech ahead of the CSR, the new Labour shadow chancellor, Alan Johnson said ‘the Tory plan is a huge gamble with growth and jobs’ and called for ‘targeted tax changes’ to take on a greater share of efforts to reduce the government’s deficit.

Writing on the Guardian’s Comment is Free website, David Banchflower,a  former member of the Bank of England monetary policy committee compared the financial crisis to an ‘economic war that has hit us hard’.

Banchflower said the coalition government’s response was the equivalent to ‘surrendering immediately because of the potential impact of the war on the deficit.’

“Contrary to claims made by various members of the government, there is no believable evidence that fiscal tightening on the scale that is being proposed ever worked,” Banchflower said. He also questioned whether the markets were demanding the level of deficit reduction planned.

Responding to Alan Johnson’s comments, the co-chair of the Liberal Democrat parliamentary treasury committee Stephen Williams said: “His aim to halve the deficit still leaves us with crippling interest payments at the expense of future public spending.

“He has called for more tax rises rather than cuts, but he fails to say where these should come from.”

© Fair Investment Company Ltd
 

 Product NameISA OptionIncome YieldMore Info
', eventAction: 'Account', eventLabel: 'Schroders Monthly High Income' });">Schroders Monthly High Income Fundyes
See Details
', eventAction: 'Apply Now', eventLabel: 'Schroders Monthly High Income' });">More Info >
The Schroder Monthly High Income Fund aims to generate a high income, whilst not compromising capital, by investing in a diversified basket of fixed income securities. 100% Discount off Initial Charges.
', eventAction: 'Account', eventLabel: 'Invesco Perpetual Monthly Income Plus' });">Invesco Perpetual Monthly Income Plus Fund ISAyes
See Details
', eventAction: 'Apply Now', eventLabel: 'Invesco Perpetual Monthly Income Plus' });">More Info >
Popular monthly income fund that aims to achieve a high level of income whilst seeking to maximise total return through investing in high yielding corporate and Government bonds, together with UK equities. 100% discount on initial charges.
', eventAction: 'Account', eventLabel: 'Henderson Strategic Bond Fund' });">Henderson Strategic Bond Fundyes
See Details
', eventAction: 'Apply Now', eventLabel: 'Henderson Strategic Bond Fund' });">More Info >
The aim of this fund is to deliver a quarterly income to investors by investing in higher yielding assets, which will include most types of fixed interest securities such as high yield bonds, investment grade bonds and government gilts, as well as having the ability to invest a proportion of the fund in equities. Income is paid to you quarterly.
', eventAction: 'Account', eventLabel: 'Schroders Income Maximiser' });">Schroders Income Maximiseryes
See details
', eventAction: 'Apply Now', eventLabel: 'Schroders Income Maximiser' });">More Info >
The Schroder Income Maximiser Fund ISA aims to deliver a target income yield of 7% pa, also providing potential capital growth. Income is paid to you quarterly. 100% Discount off Initial Charges.
', eventAction: 'Account', eventLabel: 'Invesco Perpetual Corporate Bond' });">Invesco Perpetual Corporate Bond ISAyes
See details
', eventAction: 'Apply Now', eventLabel: 'Invesco Perpetual Corporate Bond' });">More Info >
This highly popular fund aims to achieve a high level of overall return with relative security to capital. Income Paid to you twice yearly. Up to 100% Discount off the Standard Initial Fund Charge.
', eventAction: 'Account', eventLabel: 'Artemis Income ISA' });">Artemis Income ISAyes
See details
', eventAction: 'Apply Now', eventLabel: 'Artemis Income ISA' });">More Info >
One of the leading UK Equity Income Funds. The Fund managers hunt out companies with strong free cash flow and solid balance sheets. Income is paid to you twice yearly. 100% Discount off the Standard Initial Fund Charge.
', eventAction: 'Account', eventLabel: 'Jupiter Corporate Bond' });">Jupiter Corporate Bond Fund ISAyes
See details
', eventAction: 'Apply Now', eventLabel: 'Jupiter Corporate Bond' });">More Info >
The Jupiter Corporate Bond aims to achieve a high level of income with the opportunity for capital growth, through mainly investing in fixed interest securities. Income is paid to you twice yearly. 87.5% Discount off the Standard Initial Fund Charge.
', eventAction: 'Account', eventLabel: 'invesco perpetual high income' });">Invesco Perpetual High Income Fund ISAyes
See details
', eventAction: 'Apply Now', eventLabel: 'invesco perpetual high income' });">More Info >
One of the UK's most popular income fund ISAs the Invesco Perpetual High Income has delivered consistently good long term returns through a variety of market conditions. Income is paid to you twice yearly. Up to a 100% Discount off the Standard Initial Fund Charge.
', eventAction: 'Account', eventLabel: 'MandG Corporate Bond' });">M&G Corporate Bond ISAyes
See details
', eventAction: 'Apply Now', eventLabel: 'MandG Corporate Bond' });">More Info >
The M&G Corporate Bond Fund is a conservative ‘blue chip’ sterling fund that aims to produce a higher return than UK government bonds. Income is Paid to you Quarterly. 100% Discount off the Standard Initial Fund Charge.
', eventAction: 'Account', eventLabel: 'Jupiter Merlin Income' });">Jupiter Merlin Income Portfolioyes
See details
', eventAction: 'Apply Now', eventLabel: 'Jupiter Merlin Income' });">More Info >
The Jupiter Merlin Income Portfolio fund aims to achieve a high and rising income with some potential for capital growth. Income Distributions are made to you quarterly. 95% Discount off the Standard Initial Fund Charge.
* See details.
†† Income payments are dependent upon the FTSE 100 Index.

The value of investments and any return from them can fall as well as rise and you may not get back the full amount invested. Please ensure that you read the Important Risk Information below.