Older savers benefit from new allowances for Isas

Older savers can top up their Isas by up to £3,000 as new tax-free savings allowances come into force.

People born on or before April 5 1960 can now invest up to £10,200 a year into an Isa, £5,100 of which can be held in cash.

The new limits, which come into force for all age groups from the start of the new tax year in April, were announced by Alistair Darling in this year's Budget, in a bid to help savers who have been hit by the steep falls in the Bank of England base rate.

Around six million people aged over 50 who pay money into an Isa each year stand to benefit from the increased allowance.

The move has sparked a mini Isa season among providers as they compete for people's cash, with many launching new products or increasing the rates they pay on existing ones.

The over 50s typically have higher savings levels than other age groups, holding an average of more than £11,000 in Isas, nearly 50% more than the national average, and banks and building societies are keen to get their hands on this cash to help fund their mortgage lending.

Many Isa providers have also introduced new rules for savers who used their Isa allowance to take out a fixed rate bond in April, before the increase to the tax-free savings allowance was announced.

Ordinarily, people cannot increase the amount they pay into these products during their fixed term.

But the majority of the major banks and building societies have introduced special rules allowing people to top up their existing fixed-rate bond Isas, or open an additional bond alongside their existing one.

Mr Darling said: "I'm determined to help savers, because while low interest rates have helped millions of homeowners, I also know that they have hit those who rely on their savings to get by."