The Iron Chancellor finally bowed to the savings industry’s pleas to raise the annual amount that can be invested in individual savings accounts (Isas). Next year the limit will rise from £7,000 to £7,200 — the first increase since Isas were introduced in 1999.

However, savers were disappointed by the size of the increase. Paul Ilott, of Bates Investment Services, the independent financial adviser (IFA), says: “Although raising the maximum Isa contribution from £7,000 to £7,200 has to be welcomed, it is still well short of the £8,452 figure it would have been had the original £7,000 limit kept pace with inflation.”

Malcolm Dodds, of Alliance Trust, the savings company, says that if the Isa allowance had been linked to earnings, it would now stand at £10,962.

Banks and building societies welcomed the increase, from £3,000 to £3,600, in the amount that can be put into cash Isas, but Mike Regnier, of Halifax, said that more should be done to encourage long-term savings. Meanwhile, Adrian Coles, director-general of the Building Societies Association, called for regular reviews of the limits to prevent erosion by inflation.

Tax experts pointed out that the £600 increase in the annual cash Isa limit, though apparently generous, does not translate into many extra pounds in savers’ pockets. Stuart Davies, of Deloitte, the accountant, says: “The higher allowance is welcome, but the reality for a higher-rate taxpayer earning interest of 5 per cent is that the increase is worth only £12 a year. For basic-rate taxpayers, the tax benefit on the extra £600 is worth even less, at only £6 a year.”

Although the increase in the cash Isa limit is not overgenerous, it is still three times as large as the extra amount that can be placed in stocks and shares. Anna Bowes, of AWD Chase de Vere, another IFA, says that this could discourage investors from putting their money in shares, which, she argues, is the best place for long-term savings. Fidelity, the fund manager, has calculated that Isa savers who have invested £3,000 a year since 1999 would be 40 per cent better off if they had chosen to invest in UK shares rather than cash.

One saver who is unimpressed by the Isa changes is Adam Titcombe, of Northwood, Middlesex. The 33-year-old naval officer says: “My wife and I have a cash Isa for short-term saving and an equity Isa for long-term saving.

“The modest increases in the limits don’t really offer much of an incentive to save more in either type of Isa. I am particularly surprised that Gordon Brown has not done more for equity Isas if he wants to encourage long-term saving.

“In any event, it will be hard to find spare cash to put away after Mr Brown has increased my national insurance contributions.”