Isa allowance could increase to £11,532

The maximum amount savers can put in an Isa is expected to rise to around £11,532 from next april, following rises in the cost of living.

September’s Consumer Prices Index (CPI) figure, announced yesterday, was 2.2 pc, down from 2.5 pc in the previous month. It means Isa allowances could rise from £ 11,280 to £11,532 next april.

Inflation is also a factor in deciding state pension payouts. The basic state pension increases by the highest of rises in average UK earnings, the CPI or 2.5 pc.

Because inflation was lower than the 2.5 pc guarantee, pensioners should expect at least a 2.5 pc rise in the state pension from next april. an announcement confirming this is expected in December.

however, despite a fall in inflation, savers are seeing the value of their nest-eggs drop. Inflation as measured by the retail prices index (RPI) — which, unlike the CPI, includes the cost of housing — stood at 2.6 pc for the year to September, down from 2.9 pc. Basic rate taxpayers need to earn 3.25 pc before tax (2.6 pc after tax) merely to retain the spending power of their savings. higher rate payers need an impossible 4.33 pc before tax.

The top easy access account, aa Internet extra Issue 4, pays just 2.8 pc before tax — worth 2.24 pc after tax.

at these rates, the value of your savings as a basic rate taxpayer is dropping by £3.60 for every £1,000 in the account.

The decline for those who stick to high Street accounts is worse. at a top rate of 2 pc after tax (2.5 pc before) the purchasing power of their money drops by £6 per £1,000 each year.

even non-taxpayers are missing out. There is no respite for taxpayers willing to tie up their money for a year.

The top one-year, fixed-rate bond from M&S Money pays 2.48 pc after tax (3.1 pc before tax).