UK Government To Bring Forward ISA Reforms

by Robin Pilgrim, LawAndTax-News.com, London

05 February 2007

Economic Secretary to the UK Treasury, Ed Balls, last week announced that - following consultation with ISA providers - the Government's reforms to make the ISA regime simpler and more flexible for savers will come into effect a year earlier than originally planned, in April 2008.

He explained that:

"ISAs are a vital part of our approach to promoting saving. Over GBP220 billion has been invested in ISAs since 1999 and over 17 million people in Britain now have an ISA, more than double the number that held TESSAs or PEPs."

"We now want to build on that success. The reforms we will introduce next year will make personal saving simpler and more flexible than ever, and encourage every individual to save."

The reforms announced alongside the Pre Budget Report 2006, and now brought forward, include:

• Extending ISAs indefinitely, with a guarantee that the overall annual investment will remain at least GBP7,000 to provide stability for savers and certainty for the industry;
• Bringing Legacy PEPs within the ISA wrapper to enable investors to manage their funds more effectively, reduce administration costs for providers, and rationalise the savings landscape;
• Removing the Mini/Maxi distinction within ISAs to simplify the regime, making it easier to understand and administer, and increasing the flexibility for savers;
• Allowing transfers from the cash component of ISAs into the stocks & shares component to encourage savers to diversify their assets and further promoting share ownership; and
• Allowing Child Trust Fund accounts to roll over into ISAs to encourage young people to maintain a saving habit into their adult years.

Since the Pre Budget Report, Mr Balls and the Treasury have talked with over a hundred stakeholders and received a substantial number of formal consultation responses from providers and consumers. This consultation period confirmed that the industry could implement the changes from April 2008 onwards, a year earlier than originally envisaged.

Recommended