The new ISA limit could earn over 50s an extra £677million in interest over the next 12 months according to research by uSwitch.com.

Over 50s using their new cash ISA allowance of £5,100 as of October 6 could earn an additional £32 each in interest over the next year.

According to uSwitch.com, 58 per cent of all ISA savers are over 50, and the comparison website believes during the next 15 years over 50s who use their full cash ISA allowance could earn around £28,000 in interest.

Commenting, Rumina Hassam, savings expert at uSwitch.com, said: “Chancellor Alistair Darling’s decision to increase the ISA allowance for over 50s is a much needed boost for savers. Those that can afford to save £425 a month will enjoy a guaranteed tax free lump sum of money when they hit retirement.

“It will provide an added incentive to save more in a tax efficient vehicle, and will hopefully encourage those to use up their full allowance if possible.”

Additional figures published by uSwitch.com found that one in ten people in the UK cannot afford to retire, with 18 per cent of these being over the age of 65, while 14 per cent of pensioners admitted to relying on their property to fund their retirement.

Urging over 50s to consider using an ISA, Rumina Hassam added: “The increased allowance will also allow those over 50 to build up a substantial nest egg as they head towards retirement, in a tax efficient and safe way.

“ISAs are progressively being regarded as an alternative or additional route to the traditional private pension pot, and with greater parameters for saving providing more interest and more tax free benefits, this a route that more and more consumers should be considering.”

The new ISA allowance, launched on October 6 for all over 50s, will also see the stocks and shares ISA limit increased to £10,200, and will be available to all savers from April 6 2010.

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