Isa 'rollover' boost urged
Savers should be allowed to roll over any portions of their Isa allowance that they do not manage to use up in any one year, a think-tank has argued.
Policy Exchange said that instead of losing any Isa allowance that goes unused in any particular year, people should instead have the power to transfer any of their annual allowance that they do not manage to use into a "bonus Isa" or Bisa - which they can then top up at a later date.
There could be a cap, initially set at £10,000, on the total amount that savers could roll over into their Bisa, which would act as a "flexible add-on" to their main annual allowance the think-tank suggested. The cap would help to control the cost of introducing the scheme.
Policy Exchange argued that the introduction of Bisas would reflect the fact that people's incomes change throughout their lifetimes. Sometimes they have more spare cash to put away and at other times they need to tighten their belts.
It would enable people who receive windfalls, perhaps from an inheritance from or the sale of a house, perhaps as a result of downsizing as that person looks ahead to their retirement, to put more money away tax-free within a single year.
Alternatively they could top up the Bisa over a number of years until the cap is reached, Policy Exchange said.
The Isa limit for the current tax year is £15,000. Last year, the Government introduced new measures to make Isas more generous and more flexible. People can now save the full Isa allowance in cash if they want to, or in stocks and shares, or any combination of the two.
As a tax-free way of saving, Isas, which were introduced in 1999, have been a particularly vital lifeline for savers who have struggled to get real returns for their cash following years of low interest rates.
Some 23 million people hold an Isa and a total of £57 billion was deposited into adult Isas in 2013/14.
Yesterday, the Government's new market-beating pensioner bonds went on sale, with the NS&I website selling them struggling under the stampede of people looking to snap them up.
Steve Hughes, head of economics and social policy at Policy Exchange said: "Britain, as a nation, is bad at saving. Policymakers should ensure that there are as many opportunities as possible for people to keep the interest earned on the money they put away.
"Many people, for example, benefit from a one-off large financial windfall such as the sale of a house at least once in their lifetime. This is not currently recognised in the design of the savings system.
"The introduction of a bonus Isa allows people of all ages to take advantage of unused tax free savings at a point later in their lifetime."
A Treasury spokeswoman said: " We want to support savers at all stages of their life and make sure they have greater flexibility and choice over how they access their savings. That's why we announced a radical package of measures at Budget - reducing taxes for the lowest income savers, nearly trebling the cash Isa limit and giving people flexibility over their pensions.
"The launch of Government-backed savings bonds for people aged 65 and over has been hugely popular. They will give hundreds of thousands of older savers the certainty and comfort of a good return over the life of their investment."