A retirement planning expert has called on the Government to extend the new ISA inheritance rules so that savings can be passed on tax free to children as well as a spouse.

Chancellor George Osborne told the House of Commons yesterday that bereaved spouses will be able to inherit ISAs when their loved ones die with the tax free status intact.
It was one of the key announcements on savings from the Autumn Statement. But Old Mutual Wealth said today it wants to see the changes go even further.

{desktop}{/desktop}{mobile}{/mobile}

Adrian Walker, an Old Mutual Wealth retirement planning specialist, said: "The Autumn Statement is fantastic news for those that have saved into an Isa during their lifetime.
"However, the Government should consider permitting true inter-generational sharing of Isa savings. Today's proposals mean that ISA savings can in future be transferred to a spouse, or civil partner within a tax-advantaged Isa wrapper. "However, this is at odds with the abolition of the death tax on pensions, which will allow pension savings to be passed on to a wider range of beneficiaries and for the inherited pension to be passed on through multiple generations potentially free of tax."
He said: "We know that a third of retirees use some ISA savings to fund their retirement so today's news is a welcome boost for those looking to save for later life."
The Treasury said as of yesterday if an ISA holder dies, they will be able to pass on their ISA benefits to their spouse or civil partner via an additional ISA allowance, which they will be able to use from 6 April 2015.
It said: "The surviving spouse or civil partner will be allowed to invest as much into their own ISA as their spouse used to have, in addition to their normal annual ISA limit."
150,000 people a year lose out on the tax advantages of their partner's ISA when their partner passes away, according to the Treasury.
John Fox, founding director of Liberty Sipp, said: "The ability of ISA's to be passed on free of tax looks interesting from a savers perspective, but I don't think that it means that ISA's will prove more popular than pensions in relation to tax planning as it looks like they will still be party to IHT on the death of the 2nd spouse."
Julie Hutchison, savings and tax expert at Standard Life, an IFP corporate member, said: "The change to the ISA rules announced today is undoubtedly good news for those passing on wealth between spouses.
"However, the combined value of a surviving partner's ISA account will ultimately be included in their own estate for IHT. Those near to or already over age 55 may want to consider moving some of these savings into a pension, potentially allowing the pension fund to be passed on to their children and grandchildren tax free."
Kay Ingram, divisional director of individual savings and investments at Financial Planning firm LEBC said: "This will really make a difference to a lot of widows as will the tax break on joint life annuity income. The latter will be especially helpful to those widow's who have not had the opportunity to build up their own income and whose husbands have underestimated the cost of living alone."
Tina Riches, national tax partner at Smith & Williamson, the accountancy and investment management group, said: "The mass affluent will benefit from a relaxation in ISAs. This is a very helpful and practical simplification which will appear to thousands of couples given the volume of investments which have been built up over the years in such vehicles."
Mr Osborne also announced the Government will increase the ISA limit from £15,000 to £15,240 in April.

Get FREE daily news summaries direct to your inbox. Sign up on the homepage now.

Follow us on Twitter and get frequent news alerts @FPM_online.

Or follow Editor Kevin O'Donnell - @FPM_Kevin or staff writer James Nadal - @FPM_James.

For the latest Sipp, SSAS and retirement news visit our sister news site www.sippsprofessional.co.uk and on Twitter @SippsPro.