HM Treasury
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ISA reforms to encourage saving
The Economic Secretary to the Treasury, Kitty Ussher today laid Regulations that will implement a reform package for Individual Savings Account (ISAs).
The package of measures will make ISAs more attractive by increasing certainty, making the regime simpler and more flexible, and by increasing how much people can save in an ISA.
Key elements of the reform package, which comes into effect from 6 April 2008, are:
* ISAs are available indefinitely;
* All Personal Equity Plans (PEPs) will automatically become stocks and shares ISAs;
* Savers can transfer money saved in cash ISAs into stocks and shares ISAs;
* A new structure and limits, removing the Mini/Maxi distinction. From April 2008, every adult will have an annual ISA investment allowance of £7,200. Up to £3,600 of that allowance can be saved in cash with one provider. The remainder of the £7,200 allowance can be invested in stocks and shares with either the same or another provider.
Commenting on the reforms, Economic Secretary, Kitty Ussher said:
"The ISA has been successful in helping more people to save in a tax-efficient way. Over 17 million people now invest in an ISA, more than double the number who ever held a TESSA or PEP. These reforms - to come into effect in April next year - will build on the success of ISAs, making them even more attractive by allowing people to save more, and by being more flexible and simpler to use."
NOTES TO EDITORS
1. When ISAs were introduced in 1999, the Government committed to reviewing the regime after seven years, with a view to introducing any changes for 2009, at the end of the initial ten-year guarantee period.
2. The Treasury's internal review of the ISA regime concluded that ISAs have been successful in achieving their aims of encouraging saving more broadly across the population and ensuring that tax relief on savings was distributed more fairly. Following representations from stakeholders, the Economic Secretary announced a package of reforms alongside Pre-Budget Report 2006 designed to build on the success of the ISA regime.
3. During the consultation period, Treasury officials held discussions with over 160 stakeholders and received over 70 formal responses to consultation. In addition, the Economic Secretary met with representatives of the industry trade body, the PEP & ISA Managers' Association (now the Tax Incentivised Savings Association), and a cross section of providers from the asset management, fund management, retail banking and administration parts of the industry.
4. Key elements of the final package, in more detail:
ISAs are available indefinitely
ISAs are available indefinitely. There is no set end date for ISAs.
PEPs become ISAs
All Personal Equity Plans (PEPs) will automatically become stocks and shares ISAs on 6 April 2008 and become subject to ISA rules.
Transferring money saved in previous tax years from cash ISAs into stocks and shares ISAs
Savers will be able to transfer some or all of the money saved in previous tax years from cash ISAs to stocks and shares ISAs without affecting their annual ISA investment allowance.
Transferring money saved in the current tax year from cash ISAs into stocks and shares ISAs
Savers will also be able to transfer money saved in the current tax year in cash ISAs to stocks and shares ISAs. Such transfers must be the whole amount saved in that tax year in that cash ISA up to the day of the transfer.
Once money saved in the current tax year is transferred from a cash ISA to a stocks and shares ISA, it will be treated as if it had been invested directly into a stocks and shares ISA in that tax year. The saver will be able then to still save up to the full remaining balance of their £7,200 annual ISA investment allowance in ISAs in that tax year, including up to £3,600 in a cash ISA.
New structure and limits
Every adult will, from 6 April 2008, have an annual ISA investment allowance of £7,200. Up to £3,600 of that allowance can be saved in cash with one provider. The remainder of the £7,200 can be invested in stocks and shares with either the same or another provider.
5. The Government has also announced that it will allow Child Trust Fund accounts to roll over into ISAs on maturity. This will be the subject of future consultation before the first CTF accounts mature in 2020.
6. Non-media enquiries should be addressed to the Treasury Correspondence and Enquiry Unit on 020 7270 4558 or by e-mail to public.enquiries@hm-treasury.gov.uk.
7. This press release and other Treasury publications and information are available on the Treasury website at http://www.hm-treasury.gov.uk. If you would like Treasury press releases to be sent to you automatically by e-mail you can subscribe to this service from the press release site on the website.
