News Archive - September 2007
ISA savings rule change
27/09/2007
As you may have noticed, I am not a big fan of Gordon Brown. This is not a political opinion, I just feel that a lot of the changes that he made when he was Chancellor have had serious repercussions, including the lack of long-term savings and high levels of debt that have become the norm in many UK households.
For once, a change is coming in April 2008 which simplifies the current situation and might actually encourage someone to start to save. I am talking about the planned changes to ISA savings.
An Individual Savings Account (ISA) is a savings account which can be invested in cash or other investments including shares and unit trusts. The main benefit is that the interest on cash savings is free of income tax, and any Capital Gains on other investments made within the fund are free of Capital Gains Tax (CGT).
The current system of Mini and Maxi ISAs is being simplified which will
hopefully encourage more people to take advantage of these accounts. Cash
ISAs especially offer a suitable home for the risk averse who wish to
make regular savings of up to £3,000 per annum, and generally offer
similar rates and terms to standard savings accounts (instant access Cash
ISAs are available) but with the added benefit of tax-free interest.
From 6 April 2008 the new ISA rules will be as follows:
Up to £7,200 per annum can be paid into an ISA, £3,600 of which can be into a Cash ISA. (a slight increase to the current limits of £7,000 and £3,000 respectively)
ISAs cannot be held jointly, but each individual gets their own £7,200 limit
Old-style Personal Equity Plans (PEPs) will be converted into Stocks & Shares ISAs
It will become possible to transfer existing Cash ISA savings into a Stocks & Shares ISA
This last point will be especially useful to those who have built up Cash ISA savings over the years, but now wish to move some of the funds into equity investments whilst retaining the ISA tax advantages.
I am a fan of regular savings schemes, as they provide a discipline for those who struggle to put money away for a rainy day. They also offer some protection from the ups and down of the stock market by the operation of 'pound cost averaging'. I won't go into detail, but this basically means that you actually benefit from the ups and downs of the market if you keep saving the same amount each month over a long term, rather than just investing in 'chunks' if you happen to have a spare lump sum.
Please drop us an email if you would like a review of your existing savings and investments, or if you are new to it all and would like some friendly advice.