Isa limits to stay until 2009

SAVINGS limits on tax-free Isa accounts look set to be held for another five years.

Chancellor Gordon Brown had previously said the amount people can save in individual savings accounts would fall sharply in April 2006.

But he appeared to make a U-turn in his pre-Budget report, saying he would 'consult' on keeping the existing limits until 2009.

It follows strong criticism from the Opposition and the savings industry that the Government, with a pension crisis mounting, should be looking to encourage saving rather than putting people off.

The limit had been due to fall from £7,000 to £5,000 from April 2006. The amount that could be saved in a cash Isas was due to come down from £3,000 to £1,000.

'Cash Isas have done more than any other Government initiative to help those on lower incomes save,' said Adrian Coles, director general of the Buidling Societies Association. 'The BSA has consistently argued that, given the success of cash Isas, the decision to cut the limit to £1,000 in 2006 was somewhat perverse.'

The Chancellor also announced plans to roll out a Saving Gatweay pilot scheme to help low-income households. The scheme, which will cost £15m in 2005, will be based on matching savings made by low earners. The details will follow after further trialling of the scheme.

It was also confirmed a 'suite' of simple, low-cost savings and investment products would be launched in April next year. Financial services companies will be obliged to follow strict rules on charges and where money is invested if they offer these 'stakeholder' products.