Savers hope for boost from Budget


Money in handHopes are pinned on the Chancellor easing the strain on hard-pressed savers as well as building on recent signs of confidence returning to the housing market.

Savers have seen the returns on their cash squashed by four years of ultra-low interest rates as living costs remain high and wages are stagnant.

According to financial information website Moneyfacts, the impact of inflation on savings means that £10,000 invested five years ago, allowing for average interest and tax at 20%, would have the spending power of just £8,884 today.

Former Government policy adviser Ros Altmann, who recently stepped down as director-general of Saga, said that the rules around tax-free Isas should be relaxed, so that people can invest all of their allowance in cash Isas if they want to.

Under the current system, only half of the £11,280 allowance for this tax year can be saved in cash and the remainder must be invested in stocks and shares.

Dr Altmann said: "Older people who need to live on their savings cannot afford to gamble on the stock market, nor can younger generations who are saving for a house deposit.

"It is important, especially given the dramatic drop in savings interest rates, that the Government helps savers and allows them the choice of whether to invest in cash or other assets freely."

Savings rates have plummeted further since the Government introduced a scheme to help borrowers last August which gives lenders access to cheap finance.

Analysts have said that the Funding for Lending scheme makes lenders less reliant on attracting savers' deposits.

The Building Societies Association (BSA) has said the situation is so bad for savers that it wants to see the tax people pay on interest on their non-Isa savings scrapped for as long as the bank rate remains at its record low of 0.5%. Meanwhile, lenders are urging George Osborne to announce further measures to boost a recent pick-up seen in the housing market.