Flexible Isas Offer £15,000 Tax-Free Saving

Some of the barriers to saving with Individual Saving Accounts (Isas) have been stripped away from today as they become more flexible and the annual allowance rises.

Savers will be able to stash up to £15,000 each year - money they can hold in stocks and shares, cash or any combination of the two.

The New Isas - or 'Nisas' as they are being called - were demanded by campaigners who had long complained about only being previously allowed to save up to half of their annual Isa allowance in cash and the remainder in stocks and shares.

The new flexibility rules apply to all existing Isas as well as new accounts opened from today.

At the same time the annual subscription limits for Child Trust Funds (CTFs) and Junior Isas are increasing to £4,000 to enable families to save more for their children in a tax-advantaged way.

The Chancellor George Osborne, who announced the changes in his Budget statement, said today: "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 as part of our long-term economic plan we announced a radical package of measures at Budget - reducing taxes for the lowest income savers, reforming Isas and giving people flexibility over their pensions.

"Today's introduction of the New Isas is a big boost for millions of people, giving them greater economic security by putting aside money in savings."

Over 23 million adults - roughly half of the UK adult population - currently have an Isa.

But despite the greater freedom for savers, comparison websites have warned that the typical potential returns on offer for Nisas have deteriorated since the Budget - with cash elements particularly weak.

Rachel Springall, spokeswoman for Moneyfacts.co.uk, said that since March, the average rate on offer on a one-year fixed-rate Isa had fallen from 1.58% to 1.48%.

She said: "The falls in rates will likely cause much disappointment for savers who did not see a fruitful Isa season this year and have pinned hopes on the new limits to provide new deals so they can boost their income.

"Challenger banks appear to be leading the way with decent Isa deals lately."

Kevin Mountford, head of banking at MoneySupermarket.com, added: "The current rates on offer are stagnant and uncompetitive."

He said savers would need to be prepared to shop around to get the best deals.

Figures released by the British Bankers' Association (BBA) last week showed a plunge in people ploughing their savings into Isas compared with a year ago.

The BBA's report said: "There has been a lower take-up of Isas this year, with £5.3bn being deposited with high street banks during March to May, compared with £9bn in the same months of 2013."