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ISA costs could hit £1bn for the industry

The introduction of the Individual Savings Account may cost the financial services industry up to £1bn.

Management support company OSI says the costs will probably lead to charges of up to £30 a year being passed on to the consumer.

It says fund managers will bear the brunt of the costs, estimating their share of the bill will be about £300m.

Life offices can expect to pay £240m, retail banks and building societies £130m and portfolio managers £120m. The rest is shared by systems&#39 suppliers paying about £95m and new entrants to the market.

New entrants, such as Tesco and Sainsbury, could face costs of up to £45m setting up ISA computer systems.

The costs stem from the range of changes that OSI claims are needed to comply with the proposed legislation and other regulatory issues.

Principal Peter Elliott ssays: "This £1bn will be an additional cost to the financial services industry which is still coming to terms with the billions being spent on the year 2000 issue, Emu and the introduction of open-ended investment companies during the next couple of years.

"The management stretch and resourcing issues could cause major problems for the industry as a whole. A key to success will be early planning for the impact of ISAs by evaluating the best methods of customer delivery, least cost servicing and effective management."

Comment, p 29

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