Lower annual ISA increase expected after inflation change Go compare with our comparison table

Lower annual ISA increase expected after inflation change

24 March 2011 / by Paul Dicken

The measure for increasing the annual ISA allowance will move to using the Consumer Prices Index (CPI) rate of inflation from next year, the Chancellor disclosed in the Budget.

In a move which the Tax Incentivised Savings Association (TISA) called ‘disappointing’ the ISA allowance is to increase annually based on the rate of inflation measured by the CPI.

Last year the government said the ISA allowance would change each year in line with the rate of inflation measured by the Retail Prices Index – normally a higher rate.

The latest inflation figures published by the Office for National Statistics (ONS) this month showed CPI inflation was 4.40 per cent and the RPI rate was 5.50 per cent.

Based on RPI figures for September 2010, the annual ISA allowance will increase to £10,680 from 6 April 2011, with the cash ISA limit increasing to £5,340.

The Budget, published on 23 March said that as of April 2012 ‘the CPI will be used as the default indexation assumption for ISA limits.’

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Cash ISA Selection
ProviderPlan NameDeposit TakerISA OptionTermMaximum Potential ReturnMore Info
Kick Out Deposit PlanInvestec Bank plcyesUp to
6 years

3%

per annum

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Capital protected deposit plan with the potential to mature after years 3, 4, 5 and 6. If the plan matures early it will return 3% times the number of years the plan has been in force. Also available for Cash ISA and ISA transfer.
Important Information: Structured deposits offer you the potential to earn higher returns than you would with a regular savings account. Your returns are based on the performance of an index or commodity. If the investment does not perform well you may receive no income or capital growth, but you can be confident that your capital will be repaid. You have no access to your deposit during the term of the account, typically 3 to 6 years but your original capital will be repaid in full at the end of the term. In the event that the deposit taker is unable to repay your initial investment and any returns stated you may be entitled to compensation from the Financial Services Compensation Scheme (FSCS) depending on your individual circumstances.