ISA limits discourage ordinary people from saving

The maximum amount you can save in an ISA for the tax year 2017-2018 is now £20,000. The maximum annual pension contribution is £40,000. Counterintuitively, these huge allowances are actually a disincentive for ordinary people to save. With a £5,000 ISA maximum, a modest saver had an impetus to save each year for fear of missing out; with an ISA ceiling of £20,000, anyone can postpone saving until next year.

But you don’t have to be a Marxist to wonder why a household which can save £60,000-120,000 a year is in need of extra help from the state. Figures released this year by HM Revenue & Customs forecast that tax relief on pensions will cost £24.1 billion, with a further £16.9 billion spent on exemptions for employers’ contributions. Some of this is a worthwhile incentive for people who might otherwise not save; the great majority is a redistribution of wealth in the wrong direction: a subsidy to people who would save money without encouragement.