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One-size-fits-all as Isas are simplified

Chancellor confirms Isas to stay but only hints at investment increase. by Helen Pow

Chancellor Gordon Brown has confirmed that Isas will be retained permanently beyond 2010 and has offered a glimmer of hope of an increase in the maximum investment by saying it will be “at least 7,000”.

The Chancellor is also bringing Peps within the Isa wrapper, removing the mini/maxi distinction and allowing child trust funds to roll over into Isas on maturity.

Brown confirmed in the preBudget report that he will be allowing money held in cash Isas to be transferred into the stocks and shares component following Treasury Economic Secretary Ed Balls’ announcement last month. However, there was no move to allow money held in equities to be moved into cash.

IFAs and investment specialists are disappointed that the Chancellor did not confirm an increase in the annual investment limit.

T Bailey analyst Elliot Farley says: “Allowances have not been raised since Isas were introduced eight years ago. It means they have been falling in real terms, making them less of an incentive for people to make prudent provision for their future. Had they gone up in line with inflation each year since their introduction, Isa allowances would today be in the region of 8,300.

“However, we think they should have been increased in line with earnings’ growth as people save out of income. This means the limit should now be nearer 9,300.”

Credit Suisse product management director Toby Hogbin says: “We are disappointed that the pre-Budget report did not show more commitment to raising the investment limits on Isas. The Government has in the past voiced concerns about the UK population and lack of savings. Currently, only 16 million people hold an Isa. By raising this investment limit, we believe the Government would go some way towards increasing the amount of people who have an Isa and give more people an incentive to save tax-free.”

Bestinvest investment manager Hugo Shaw is confused as to why equity holdings cannot be transferred to cash, if cash can now be transferred to equities. He says: “The Government is trying to promote investment but, if you are moving towards retirement, transferring to cash might be more appropriate. Being able to have it flowing both ways would be great but unfortunately we do not have that.”

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