Each saver should be allowed to invest up to a total of £9,600 tax-free, the IMA believes, as an added incentive to save for the future.

The ISA (Individual Savings Account), now in its tenth year of existence, allows savers to shelter a certain amount of their savings from tax.

Since their conception in 1999, when they replaced Personal Equity Plans (PEPs) and Tax-Exempt Special Savings Accounts (TESSAs), the ISA allowance remained the same until last year, when it was increased slightly, and they have been simplified to encourage people to open them.

Until the 2008/2009 tax year, the total that could be invested was £7,000, £3,000 of which could be saved in cash and the remainder in stocks and shares.

In the Budget for the 2008/2009 tax year, the Treasury increased the limit to £7,200, of which £3,600 can be saved in a cash ISA, or it can all be invested in a stocks and shares ISA.

But the IMA believes that the Government should be doing more to encourage people to take advantage of their tax free savings allowance, such as increasing the total limit to £9,600.

“Ten years on, the ISA is still a great product – a straightforward, simple way to roll up savings and ultimately use them completely tax-free,” said Richard Saunders, chief executive of IMA.

“But the time is also ripe to look for ways to rejuvenate the incentives to save in ISAs. A good start would be to raise the ISA allowance to a level which would restore its value taking account of inflation since its introduction.”

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