IFAs and fund managers are gearing up to fight for the £21bn of Tessa money maturing this year.
Around two million Tessa accounts are due to mature over the next 12 months. IFAs face tough competition from banks and building societies trying to keep the money in cash Isas and savings accounts.
The capital from Tessas can be rolled over into Tessa-only Isas without affecting normal Isa limits. But any interest which is reinvested will not remain tax-exempt and can only be sheltered by investing within the normal Isa limits. Fund managers are urging investors to put their gains into investment funds and stocks and shares Isas.
AITC communications director Annabel Brodie-Smith says: “The average investment trust has turned £1,000 into £1,930 over the past five years compared with £1,693 in the average stockmarket Tessa. You are looking at much gre ater returns in an investment trust.”
Bates Investment senior Analyst James Dalby says: “Investors should not make the mistake of doing nothing at all, as your money could be transferred to an account paying a poor rate of interest, perhaps as low as 2 per cent, which will then be taxed.”