UK Retail Investors Dismayed At Loss Of Tax Perks

by Robert Lee, Tax-News.com, London

11 June 2004

A new survey has revealed that 30% of investors feel “less inclined” to invest in Individual Savings Accounts (ISAs) as a result of the Government’s plans to reduce the annual allowance from £7,000 to £5,000 in the 2006/7 tax year, coupled with the recent abolition of tax credits on ISA dividends.

The survey, undertaken by NMG Research on behalf of ISIS Asset Management, also revealed that levels of disillusionment were highest amongst investors in the age groups 45-54 and 55-59, traditionally the core purchasers of ISA and savings products; 40% and 45% respectively stated that they were “less inclined to invest” as a result of the tax changes.

Overall, some 30% responded “I feel less inclined to invest in ISAs in the future”, while 51% stated that “these changes will not make any difference to my view of ISAs”. Only 4% suggested that they would be “more inclined to invest in ISAs in the future.” Respondents who were unsure accounted for 15%.

Jason Hollands, director, head of communications and strategy at ISIS Asset Management observed: “These findings are sadly no surprise to us since key players in the investment industry have repeatedly warned the Government about the negative impact on sentiment that such measures would generate.”

“When Labour replaced Personal Equity Plans with Individual Savings Accounts, these were heralded as a flagship part of Government policy to encourage private savings,” added Hollands, “but the flagship increasingly looks like it is being torpedoed by its own side.”

ISIS is urging the government to either reaffirm its support for the savings industry or launch a consultation with investment firms to discuss new tax incentives aimed at encouraging people to save.

“What cannot happen is the perpetuation of this limbo,” concluded Hollands.

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