The UK government has sought to guarantee the future of tax-free saving in the UK by extending the life of Individual Savings Accounts, or ISAs, indefinitely.
In a speech to the the annual conference of the Pep and Isa Managers’ Association (PIMA), Ed Balls, the Economic Secretary to the Treasury, pledged that the ISA regime will be extended permanently, ending widespread concern that the plans could be abolished in 2010.
“We will make the Isa a permanent feature of the savings landscape," Balls told the conference.
However, investors will still only be able to invest GBP7,000 per year in stock and share ISAs to receive tax free income, while the GBP3,000 investment ceiling for mini 'cash' ISAs will stay at GBP3,000. Balls gave no indication that these limits will be increased any time in the future.
He did, however, announce that the ISA saving structure will be simplified by abolishing the distinction between share and cash ISAs (although the separate investment limits will remain in place). Personal Equity Plans (PEPs), which the government began phasing out in 2002, will be rolled into the ISA scheme and effectively abolished. This is expected to happen in time for the start of the 2007/8 financial year.
ISAs have proved more popular with the British public than was first envisaged. Since their introduction in 1999 - initially for a period of ten years - more than GBP215 billion has been invested in them by 16 million savers.
Welcoming the move, the savings industry praised the government for listening to its concerns over the uncertainty of the current regime.
“We are delighted that the Economic Secretary to the Treasury used the platform of the PIMA annual conference to announce this significant ISA reform package," announced Tony Vine-Lott, Director General of PIMA.
"The commitment to ISAs beyond 2010 and the removal of the mini/maxi distinction are key issues which PIMA have lobbied for as part our input to the ISA review. We are absolutely delighted that the Treasury has taken on board these recommendations," he added.
The Treasury will reveal more precise details of its plans for ISAs in the pre-Budget report, expected in four to five weeks.
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