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Revenue set to prevent long Isa lock-ins

Isa providers will be prevented from locking in investors for lengthy periods under rule changes proposed by the Inland Revenue.

The amendments, which will take effect from October 1 if they receive Treasury approval, will mainly affect cash Isas.

Providers will not be prevented from offering five-year fixed or guaranteed rates but investors will be allowed to withdraw or transfer their funds by giving 30 days&#39 notice. Previously, some providers of mini cash Isas refused to allow any withdrawals.

However, the changes will not prevent investors in structured products from being hit by penalties if they decide to withdraw early.

Existing products will be allowed to finish their lock-in terms but new money will be included in the amendments.

In April, four providers were identified as having caught the Revenue&#39s attention for violating existing Isa rules.

There was speculation that Bradford & Bingley, Liverpool Victoria, Julian Hodge Bank and Ipswich Building Society might face a crackdown because they prevented investors from withdrawing funds.

The Inland Revenue says only a small number of existing Isa providers will have to substantially change the terms of their products. A spokesman says it is “a reasonable comment” that these mini-cash Isa providers will be affected.

Chase de Vere Investments savings and investment manager Anna Bowes says: “It is really only going to affect mini cash Isas with five-year lock-in periods. In our experience, the majority of stockmarket-linked structured Isa products which have a five-year term already allow access to investors&#39 funds, albeit with a penalty.”

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