At the current instant access savings account rate of 0.55 per cent, an individual would need to have £180,000 in savings to generate £1,000 in income on their savings, according to Mintel. The 0.55 per cent interest rate is accurate to February 2015, according to Bank of England data.
For more financially-savvy investors who choose a one-year fixed savings bond the current rate is 1.25 per cent, meaning those with £80,000 or more in savings will get £1,000 in savings income.
Only 15 per cent of the population have more than £50,000 in investible assets, according to Mintel research, highlighting how many will benefit from the full relief.
The new personal savings allowance means the first £1,000 of savings income will be exempt for basic rate taxpayers and the first £500 for higher rate taxpayers.
“For most people this is going to pretty much make a minimal difference… probably the penny off the price of beer makes more difference to most of them than tax free savings, but if you go further up the scale it makes a bigger difference,” says Toby Clark, director of research at Mintel.
The typical UK household has £4,000 in savings accounts, according to Office for National Statistics data, which at current instant access rates would mean £22 in interest annually.
However, George Osborne says the £1,000 of tax-free interest will abolish tax on savings for 95 per cent of the UK.
According to Santander, around two thirds of adults, or 34 million people, have a taxable savings account in the UK, generating an estimated £600 million in tax revenues as a result
Coupled with the changes to ISAs, allowing individuals to move money in and out of their ISA without losing their annual limits, the changes could have more impact, says Clark.
“But you’ve got to qualify the impact on the population as a whole. Even among existing ISA owners, only 12% say that they will ‘definitely save the full ISA allowance in the next tax year’, so that annual contribution limit was already pretty academic for most people in the population,” he says.
“Anything which incentivises savings is welcome. The only irony is we could end up with more ISA than pension millionaires,” says Steven Cameron, regulatory strategy director at Aegon.