Increased ISA allowance boost for over 50s

As the over 50's wait patiently for the governments ISA limit increase, new research from uSwitch.com, the independent price comparison and switching service, reveals that the UKs 21 million over 50 year olds could earn themselves a whopping £677 million of extra interest in the next 12 months alone. For each individual that's an extra £32 of tax free interest each year on the increased cash ISA allowance (from £3,600 to £5,100). By taking advantage of the full allowance, these individuals could save up to £105k each by the time they hit retirement with interest totalling almost £28,000. This could provide a reasonable lump sum towards a decent pension income without the added risk of the stock market.

This increase in ISA limits is a much needed boost for savers who have endured the rough ride of plummeting interest rates and dwindling savings pots in over the last year. And if interest rates return to an average of more than 4% as they were at the beginning of 2008, £171 billion worth of additional interest will be available over the next 15 years to Brits over 50 investing the full allowance. Already, many of those nearing retirement have witnessed the instability of private pensions. This latest increase in the ISA allowance gives those over 50 an alternative to the traditional pension, with tax free advantages and the flexibility of not being forced to buy an annuity.

Further research from uSwitch.com has already shown that pensioners that have relied on more unpredicatable investments to fund thier retirement are really paying the price now. In fact, almost one in 10 people in the UK simply cannot afford to retire and 18% of these are over 65. Sadly, 37% of over 65 year old now feel they will have to work until the age of 77 in order to survive financially. Already 14% of pensioners are replying on their property for retirement and 24% are hoping the stock market will fun their old age. These people could be really disappointed if the financial climate doesn't take a drastic turn for the better.

Rumina Hassam, savings expert at uSwitch.com, comments: "Chancellor Alistair Darling's decision to increase the ISA allowance for over 50s is a much needed boost for savers. Those that can afford to save £425 a month will enjoy a guaranteed tax free lump sum of money when they hit retirement. It will provide an added incentive to save more in a tax efficient vehicle, and will hopefully encourage those to use up their full allowance if possible."

"The increased allowance will also allow those over 50 to build up a substantial nest egg as they head towards retirement, in a tax efficient and safe way. ISAs are progressively being regarded as an alternative or additional route to the traditional private pension pot, and with greater parameteres for saving providing more interest and more tax free benefits, this a route that more and more consumers should be considering."