An individual savings account – more commonly known as an ISA – is one of the best and most tax efficient ways to save.

Since replacing PEPs (Personal Equity Plans) and TESSAs (Tax Exempt Special Savings Accounts) in 1999, ISAs have been a great success. According to Hargreaves Lansdown, 49% of the adult population hold one or more ISA accounts.

(Click here for your ISA back-to-basics guide for 2014)

However, Hargreaves Lansdown suggests improvements to the rules would encourage even more people to save and invest.

Here, the firm puts forward five suggestions to boost ISA savings:

1. Introduce a long term care element to ISA

Savers and investors currently lack dedicated products to protect themselves against the costs of long term care – so called “pre-funded” long term care insurance failed as it was expensive and people were concerned that if they did not claim they would lose the premiums paid.

A long term care ISA allowance which can only be drawn upon in the event of needing nursing care but would be passed onto your beneficiaries inheritance tax free if not required, would be a good solution.

Danny Cox, head of financial planning at Hargreaves Lansdown, said: “A long term care ISA would encourage people to set aside money for nursing care in the knowledge that if they did not require care their savings would not be lost.

“This could also be funded by a separate additional ISA contribution allowance and savers could be able to roll over tax-free cash sums from pensions into it. The cost to the Government in additional tax relief should be more than offset by higher personal provision, thereby relieving some of the burden on the State.”

2. Allow a spouse to inherit a deceased investor’s ISA wrappers

On the death of an ISA saver, any investments held in an ISA in their name lose their ISA status, before being passed on to be inherited by the surviving spouse or civil partner. Accounts become taxable and in the case of cash ISA, often attracts a lower rate of interest, reducing income at a difficult time.

Many married couples later in life have much of their savings in one person’s name (even if they are joint savings). In such instances the survivor risks losing out significantly. Savings and investments should be transferred to the survivor intact, i.e. without leaving the ISA wrapper.

3. Allow the transfer of insurance investment bonds to ISAs (and pensions) – without incurring a tax charge.

Investment bond sales are in free-fall as a result of changes to capital gains tax rules and the RDR (Retail Distribution Review). However investment bond holders often remain trapped in “zombie” products with high charges and poor fund choices, unable to transfer due to penalties or tax charges. Allowing a transfer to an ISA (or pension) without a tax charge would improve investors’ outcomes and the flexibility of savings products generally.

4. Tax-free cash and trivial commutation amounts from pension into ISA

As a further avenue for flexibility, and to encourage saving and investing, we believe tax free cash and trivial commutation amounts should be eligible for transfer into an ISA without affecting annual subscription limits.

5. Equalise tax-free treatment of cash in stocks and shares ISA

Transfers between financial products are improving but will always remain time consuming and impose a barrier for savers and investors. Currently, cash held within a stocks and shares ISA is effectively subject to basic rate tax. If this became tax-free, this would remove the need for transfers between ISAs of any type. People would then be entirely free to choose how they allocate their ISA allowance between cash and stocks and shares.

The Budget announcement for 2014 will take place on 19 March .