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Individual Savings Account (ISA)

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1 February 2007

Simpler, more flexible ISAs from April 2008

The Economic Secretary to the Treasury, Ed Balls, today announced that - following consultation with ISA providers - the Government's reforms to make the ISA regime simpler and more flexible for savers will come into effect a year earlier than originally planned, in April 2008.

Ed Balls said:

"ISAs are a vital part of our approach to promoting saving. Over 220 billion has been invested in ISAs since 1999 and over 17 million people in Britain now have an ISA, more than double the number that held TESSAs or PEPs.

"We now want to build on that success. The reforms we will introduce next year will make personal saving simpler and more flexible than ever, and encourage every individual to save."

The reforms announced alongside the Pre Budget Report 2006 include:
 

  • extending ISAs indefinitely, with a guarantee that the overall annual investment will remain at least 7,000 to provide stability for savers and certainty for the industry;
  • bringing Legacy PEPs within the ISA wrapper to enable investors to manage their funds more effectively, reduce administration costs for providers, and rationalise the savings landscape;
  • removing the Mini/Maxi distinction within ISAs to simplify the regime, making it easier to understand and administer, and increasing the flexibility for savers;
  • allowing transfers from the cash component of ISAs into the stocks & shares component to encourage savers to diversify their assets and further promoting share ownership; and
  • allowing Child Trust Fund accounts to roll over into ISAs to encourage young people to maintain a saving habit into their adult years.

Since the Pre Budget Report, Ed Balls and the Treasury have talked with over a hundred stakeholders and received a substantial number of formal consultation responses from providers and consumers. This consultation period confirmed that the industry could implement the changes from April 2008 onwards, a year earlier than originally envisaged.

Notes to editors

  1. The Economic Secretary has today written to the heads of the major industry trade bodies to notify them of his decision to implement the package of reforms to the ISA regime on 6 April 2008.
  2. When ISAs were introduced in 1999, the Government committed to reviewing the regime after seven years, with a view to introducing any changes for 2009, at the end of the initial ten-year guarantee period.
  3. The Treasury's internal review of the ISA regime concluded that ISAs have been successful in achieving their aims of encouraging saving more broadly across the population and ensuring that tax relief on savings was distributed more fairly. Following representations from stakeholders, the Economic Secretary announced a package of reforms alongside Pre-Budget Report 2006 designed to build on the success of the ISA regime.
  4. During the consultation period, Treasury officials held discussions with over 160 stakeholders and received around 70 formal responses to consultation. In addition, the Economic Secretary met with representatives of the industry trade body, the PEP & ISA Managers' Association, and a cross section of providers from the asset management, fund management, retail banking and administration parts of the industry.
  5. The change to allow Child Trust Fund accounts to roll over into ISAs on maturity will start to have effect when the first accounts mature in 2020. Further consultation will be conducted on this measure in advance.
  6. Media enquiries should be addressed to the Treasury press office on 020 270 5238.
  7. Non-media enquiries should be addressed to the Treasury Correspondence and Enquiry Unit on 020 7270 4558 or by e-mail.
  8. This press release and other Treasury publications and information are available on the Treasury website. If you would like Treasury press releases to be sent to you automatically by e mail you can subscribe to this service from the press release site on the website.


Information here is general only & believed to be correct, though we cannot guarantee it, nor do we accept any liability if you act or fail to act on this information. Always seek professional advice before making decisions. Investments can go down in value as well as up over  time.