This years budget served up a few surprises. As part of the Chancellors drive to help savers, he announced a significant increase in the amount that can be paid into ISA’s and also reformed it into a ‘simpler’ savings product. Called ‘New ISA’ (NISA) all existing ISAs will become NISA’s!
The change will take place from the 1st July 2014 and from that date the overall annual subscription limit for these accounts will be increased to £15,000 for 2014/15.
For the first time, ISA savers will be able to subscribe this full amount to a cash NISA (currently only 50% of the overall ISA limit can be saved in cash). Investors are able to open one Cash NISA and one Stocks and Shares NISA each tax-year. However, once open, the Cash or Stocks and Shares NISA can be transferred between providers unlimited times.
Under the NISA, investors will also have new rights to transfer their investments from a stocks and shares to a cash account (currently only the opposite is possible). There will be consequential changes to the rules on the investments that can be held in a NISA, so that a wider range of securities (including certain retail bonds with less than five years before maturity) can be invested. In addition, Core Capital Deferred Shares issued by building societies will become eligible to be held in a NISA, Junior ISA or CTF.
Between the 6th April and 1st July 2014, the total amount that can be paid into a Cash ISA is £5,940 and the combined amount paid into Cash and Stocks and Shares ISAs must not exceed £11,880. From 1st July 2014, existing ISAs will automatically become NISAs, with a higher limit and more flexibility. Thereafter an investor can add further money to either their Cash or Stocks and Shares NISA, up to the new £15,000 limit. From the 1st July 2014, any money held in a Stocks and Shares NISA can be transferred to a Cash NISA.
Different transfer rules will apply depending when funds were paid into the Stocks and Shares account. If money is invested between April and July 2014, this sum must be transferred as a whole. Other amounts from previous years may be transferred as a whole or in parts, if the provider permits.
Child trust Fund / Junior ISA
The amount that can be subscribed to a child’s Junior ISA or CTF in 2014/15 will also be increased to £4,000.
Whilst this move is heralded to make saving into an ISA ‘simpler’, there are certain aspects which add complication. For example the fact that you can move money freely between Cash based savings to Stocks and Shares Investment and vice-versa.
We welcome these changes which are positive for savers and investors; the need for advice in terms of movement of money from one type of investment (deposit to equity based investment and vice-versa) makes the need for clear financial advice even more compelling.