Isa limits should be increased in line with inflation "to offer fair value to investors" who invest the full amount allowed each year, claims the Alliance Trust.
Figures compiled by the Alliance Trust suggest those investors who are investing up to 7,000 in their maxi Isas are essentially losing out on £6,573 in tax breaks between their launch and 2010, as the government has not raised the maximum investment limit since they were introduced in 1999.
Its research centre argues Isa limits would be 19% higher by 2010 than current levels and would reach £8,310 by March 2010, if the limit had been raised in line with official consumer price index inflation.
However, as the Treasury has not raised it and is not expected to raise the limit until 2010, the Alliance Trust suggests investors are already missing out on the chance to invest up to £7,677 this year – a move which it suggests is unhelpful when the government is attempting to encourage people to invest more for their retirement.
According to the AT, over 16 million people – more than one in three adults – have an Isa and have saved over £190bn since their launch in 1999.
That said, research compiled by the Pep and Isa Managers Association (Pima) reveals just 12% or 1.46m of all Isa plans in the tax year ending April 5th 2005 were maxi Isas - giving investors the option of investing up to £7,000 in the investment markets.
And of the £27bn invested gross in tax year 2004/2005, just £6bn was invested in maxi Isas – suggesting investors saved an average amount in a maxi Isa of just £4,122.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Julie Henderson on 020 7968 4571 or email [email protected].IFAonline
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