The chief executive of one of the UK’s oldest mutually owned providers of savings and investment products has called on the new Chancellor of the Exchequer, Rishi Sunak, to use next week’s Budget to provide clarity on future policy in relation to ISAs. His call comes against the backdrop of the Government having, with just one month to go, not yet announced the subscription limits for ISAs for the tax year beginning on 6 April 2020.
The subscription limit for adult ISAs for the current tax year, which ends on 5 April 2020, is £20,000 per person. For junior ISAs, which can be opened on behalf of under-18s who are resident in the UK, the 2019-20 subscription limit is £4,368.
Peter Green, chief executive of Greater Manchester-headquartered Healthy Investment, said, “This is the latest that the industry, and the investing public, have ever had to wait before being told how much they will be able to invest in ISAs next year. Aside from the operational uncertainty this causes for providers, it also makes it hard for responsible members of the public to plan their savings and investment activity.
“What is possibly more worrying, though, is why the Government has left it so late in the day to announce these limits. Usually setting subscription limits is a fairly technocratic exercise so is it just that the Treasury have been too busy to look at this yet, or is the Chancellor planning a bigger announcement?
“I would strongly caution him against any moves that would weaken the incentives for people to do the responsible thing and save for their futures and those of their families. Given all the political uncertainty at the moment, we would welcome a firm commitment to the future of ISAs and a statement of intent with regard to subscription limits for the remainder of the parliament.”
In addition to safeguarding the future of ISAs Mr Green also called on Mr Sunak to use his Budget, scheduled for 11 March, to clarify the Government’s position regarding Child Trust Funds (CTFs), the first of which will mature when their beneficiaries begin to turn 18 in September this year.
The Government has recently stated that, rather than “cashing out” on the holder’s 18th birthday, these can now “roll-over” into tax-advantaged accounts or, if the provider already offers ISAs, into an ISA. It is not clear whether CTFs that roll over into adult ISAs will count toward that year’s ISA subscription limit.
“The most straightforward thing would be to align CTFs fully with Junior ISAs,” Mr Green continued. “These convert into adult ISAs on the owner’s 18th birthday, without counting toward that year’s subscription limit, and the simplest and most appropriate thing would be for CTFs to do the same thing.
“There is no point reinventing the wheel, nor in creating a two-tier system depending on which provider a CTF is currently held with. For the sake of simplicity and fairness we would like all maturing CTFs to be able to transfer into ISAs without eating into that year’s subscription limit.”
Individual Savings Accounts (ISAs) enable their holders to invest up to the subscription limit each year in cash, stocks and shares, “innovative finance” assets or a combination of the three. Interest, dividends and investment growth are free of income tax or capital gains tax.
Healthy Investment, which was founded in 1835 as The Independent Order of Rechabites, has its origins in the temperance movement that grew up during the Industrial Revolution. Today it provides ISAs, Investment Bonds, Junior ISAs, Child Trust Funds and savings plans to more than 110,000 members.
"I would strongly caution the Chancellor against any moves that would weaken the incentives for people to do the responsible thing and save for their futures and those of their families."