People should be given more flexibility to build up their tax-free savings pots during the course of a lifetime under new plans to introduce a Bonus ISA (BISA).

The BISA would be offered to anybody who is unable to use their full annual tax-free savings allowance (currently set at £15,000). People would be given the power to roll over any unused portions of their existing ISA allowances into their Bonus ISA account. There would be a cap – initially £10,000 – on the total amount that customers could roll over into their BISA. This allows the Exchequer to control the cost of introducing the new scheme.

People who experienced a one off financial windfall such as an inheritance, house sale or redundancy payment would benefit from being able to save a much greater amount into a tax-free account within a single year. Alternatively they could utilise the BISA over a number of years until the cap is reached.

ISAs have proved to be extremely popular since their introduction in 1999. However, the paper finds that current the ISA regime fails to recognise that income patterns and the ability to save is not consistent over a lifetime.

• 23 million individuals hold an ISA account and 13.5million people subscribed to Adult ISAs in 2013/14.
• A total of £57billion was deposited into Adult ISAs in 2013/14.
• Based on 2011/12 statistics, only 7.5% of people under 25 had an ISA, compared to 15.7% of 25-34 year olds and 23.8% of over 65s.
• The latest available statistics show that, of the one million people that utilised their full ISA allowance, over 50% of this group having an income of less than £30,000.