Nationwide calls on the Chancellor to make saving a priority

Nationwide Building Society, ahead of next week's Budget, has called on the Chancellor to reform the ISA system and do more to encourage children and parents to save.

The Society is a keen supporter of government initiatives that encourage the savings habit and hopes Alistair Darling will take the practical steps needed to ensure the Government's stated aims in these areas are met.

Nationwide has written to the Chancellor and recommended the following:

Individual savings accounts (ISAs)

Nationwide welcomes the Government's commitment to encouraging and promoting saving through ISAs, but believes the system could be simplified and made more flexible. The Society calls for:

a withdrawal buffer that allows savers to make withdrawals and replenish their ISA within the same tax year - this would particularly help people on lower incomes;

cash and stocks and shares ISA subscription limits to be equalised;

ISA subscription limits to be linked to inflation to ensure their true value is maintained.

Children's savings

Nationwide thinks the Government can do more to encourage parents, friends and family to save for children whether they qualify for a Child Trust Fund (CTF) or not. Currently, parents whose children do not have a CTF are penalised through taxation if they want to save as much as those that do have a CTF. Of equal concern is the fact that 60% of Child Trust Funds have not seen any additional contributions. The Society has called for:

the tax exemption thresholds for interest earned on savings for children by parents to be increased as Nationwide estimates that parents could be faced with a tax bill of £5,900 over 18 years1;

a further Government contribution of £250 when a CTF child reaches the age of 11.

Graham Beale, Nationwide's chief executive, says: "Alistair Darling has an opportunity to introduce changes that can make a real difference to people's wealth in his first Budget as Chancellor. The ISA system has proved to be a success with over 16 million2 accounts in operation, but more can be done to encourage consumers to use their ISA allowance and embrace the tax-efficient benefits they bring. And in order to build a savings habit in younger people, we would like to see Alistair Darling encourage more parents to contribute to their children's trust funds and do away with the current tax inequality.

"We hope the Chancellor takes this opportunity, to make clear his commitment to saving by making it a priority."