Fidelity International is calling on the chancellor to make ISAs completely tax-free in his upcoming Pre-Budget Report in a bid to jump-start the nation's savings.

Fidelity is proposing that Alistair Darling make ISAs fully free of all income and capital gains taxes and restore the dividend tax credit as a way to immediately boost ISA income, especially for basic rate tax payers and encourage new savers.

They argue that this would contribute to improving Britain's savings rate – currently lower than the European average – and would be in line with the government's stated policy of encouraging people to take greater personal responsibility for their financial security.

Gary Shaughnessy, UK managing director at Fidelity International, says, ‘The real goal for the government is not rewarding those existing savers who can afford to invest more, but to encourage people without current savings to make a start and to do so as early in their lives as possible.

‘The only way to do this is to make ISAs tax-free. Simplicity was at the heart of the ISA's success in its early years but changes to its tax efficiency over the years have added unnecessary complexity and diminished the product in the eyes of the public. We need to make ISAs simple again to bring back their appeal and get away from the current situation where the value of the tax benefit varies with the asset class you are invested in.’