Pensioners urged to make use of ISAs

Fidelity International has revealed that individual savings accounts (ISAs) can help over-50s save an extra £43,000 from the taxman, but only if they take advantage of the newly implemented ISA allowance.

The company said that people who opt for this alternative could see their investment returns increase by as much as 126 per cent by the age of 65 compared to an investment held outside an ISA wrapper.

"I cannot put it more simply: if you have savings you must consider an ISA. If you pay tax an ISA should be the first place that any non-pensions savings go," commented Paul Kennedy, director of tax wrapper and trust planning at Fidelity International.

"I suspect that many people recognise an ISA to be tax-advantageous but few really understand just what that means and just how much money they could be throwing away."

He explained that the type of investment does not matter but as long as an ISA is used, the taxman will not ask for anything.

Meanwhile, around 540,000 pensioner households are preparing to see their incomes rise by an average of £4 a week from November as changes on the way income from savings is worked out for benefit purposes kick in.

According to Age Concern and Help the Aged, the changes, which were outlined in the 2009 Budget, will see people with savings over £6,000 brought into entitlement. This group currently just misses out on the payment.

In a bid to help pensioners deal with the cold winter period, Leeds Building Society recently launched an innovative monthly savings account specifically designed for the age group.

The Winter Fuel Saver account is purposely meant for people above the age of 60 and it is aimed at helping them deal with the expected pressure on their finances that occurs during the colder months.

Pensioners who qualify can enjoy a rate of 5.12 per cent AER during winter when a surge in fuel bills is normally experienced, with the product offering an overall AER of 2.66 per cent.

According to Kim Rebecchi, director of sales and marketing at Leeds Building Society, the historically low interest rates have left many people who rely on their savings to boost their pensions suffering.

"We focus on what is important to customers and we have developed this innovative product to deliver a very competitive return with the majority of the interest paid during the winter months, when customers need it most," she said.

"Therefore, we have designed this unique product to pay an excellent guaranteed return in a way that helps savers, delivering an up front return at a time when bills are at their highest."

She added that the company expects the savings account to be popular with pensioners due to the fact that it is a limited issue and called on customers to "act quickly to avoid disappointment".