Business

Savings up as new rules take effect, say banks

Cash Image copyright PA
Image caption The new limits were announced by the chancellor in the Budget

High Street banks have reported a rise in savings deposits in July following the launch of New Individual Savings Account (Nisa) rules.

Savers deposited £4.9bn in Nisas in July as some took advantage of the new, higher limit for the tax-free accounts.

Chancellor George Osborne announced in the Budget that the allowance for Nisa savings or investments would rise to £15,000 in July.

But some savers appear to have delayed paying in deposits.

Usually, there is a big surge in saving into these accounts in April as the new tax year starts. This coincides with a fresh annual allowance for these tax-free accounts.

However, in April, deposits were down on previous years, as some people waited until the new, higher allowance was introduced in July, according to the figures from the British Bankers' Association (BBA).

Deposits in April totalled £3.9bn, compared with £6.3bn in the same month a year earlier, and £7.5bn in April 2012.

New rules

About 23 million adults, roughly half the UK adult population, have a tax-free Nisa or its predecessor the Isa - or Individual Savings Account.

However, the low interest rate environment means that on average, savers are only getting a return of 0.86% on these accounts, according to figures from the Bank of England.

In an attempt to make these accounts more attractive and promote saving, Mr Osborne changed the rules by raising the annual allowance.

Deposits totalled £4.9bn in July, compared with £18m last July, and £806m in July 2012.

Mr Osborne also made changes that mean that since July, for the first time, the allowance can be held in cash, or stocks and shares, or any combination of the two.

Also, any money that is held in stocks and shares Isas - opened during any tax year - can be transferred into a cash Nisa, although some providers might not allow partial transfers.

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