Isa providers will no longer be allowed to lock-in investors for long periods, prevent them from withdrawing or transferring their funds under changes to the regulations released this week.
Assuming the Treasury approves of the new rule changes, as of October 1 Isa managers will no longer be able to require lock in periods for five years, as is common now. They will be able to continue offering them, but investors will be able to withdraw or transfer out of the funds upon request.
Under the new regulations, investors will be able to request a withdrawal or transfer from their Isa and the provider would have to comply within 30 days.
The changes will largely affect cash Isas, as most equity based Isas do not have lock-in features, although structured or guaranteed Isas will also be affected.
The Inland Revenue had concerns about a number of cash Isa providers who were locking in investors and it is thought the regulation changes will be targeted at them.
Existing providers with current lock in periods will be allowed to continue them until maturity, but new investors' money will be subject to the new rules.