ISAs Scaling new heights
ilp
Higher
investment limits and more flexible rules should
translate into record ISA sales this tax year, but it is unlikely to improve the
investment choices made by many savers, says Richard Eagling
Tasked by the Government with helping to encourage a greater savings culture among the UK population, Individual Savings Accounts (ISAs) have established themselves as an integral part of the financial landscape since they were introduced in 1999. Almost 16 years on and £470 billion has been invested in ISAs, a figure that is set to rise sharply over the coming months as savers look to take advantage of the much higher ISA limits and greater flexibility now in place.
In terms of ISA sales, the 2013/14 tax year proved to be a slightly disappointing affair. Figures published by HMRC show that around 13.5 million ISAs were subscribed to in 2013/14, down from 14.6 million in 2012/13, although the total amount invested remained steady at around £57 billion. However, most commentators agree that this tax year should see a far greater influx of money into ISAs, largely due to the higher investment limits that permit individuals to put 30% more money into ISAs than in the 2013/14 tax year.
Higher limits
A year ago the overall ISA subscription limit was set at £11,520, although the maximum amount that could be subscribed to a cash ISA was restricted to just £5,760. However,
from 1 July 2014 New ISAs (NISAs) were introduced, bringing in a new annual allowance of £15,000, which can be held in cash, stocks and shares or any combination of the two. At the same time, the limit for a child Junior ISA increased to £4,000, with similar freedoms as to how the money can be allocated between cash and stocks and shares.
By removing the traditional distinction between cash and stocks and shares, individuals will enjoy far more flexibility as to how they can save their higher annual ISA allowance. Importantly, under the NISA rules savers can transfer previous years’ ISA savings freely between stocks and shares and cash in either direction as they wish. Previously, it was only possible to transfer from a cash ISA to a stocks and shares ISA.
“The higher NISA subscription limit will, of course, be popular with investors,” comments Magi Andrews, Chartered Wealth Manager at Walker Crips. “We have experienced increased contributions already and we expect that record levels of new funds will flow into ISAs for 2014/15. It has to be said, however, that most of the increase will stem from those with existing investment portfolios or ISAs who will be looking to take advantage of the tax benefits.”
March 2015 Investment Life & Pensions Moneyfacts ® 15
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