Focus on facts
What are corporate Isas?
A corporate individual savings account (Isa) is a corporate version of an Isa that an employer can offer to employees on a collective basis, often through a payroll deduction or direct debit facility.
Where can employers get more information?
Who are some of the main providers in the market?
Barclays Stockbrokers, Fidelity, Friends Life, Hargreaves Lansdown, Legal and General, Scottish Widows, Standard Life, Wealth at Work.
Corporate individual savings accounts are a tax-efficient, easy-to-use savings vehicle that employers can offer their employees to put money aside for the future, says Nic Paton
A corporate individual savings account (Isa) is a workplace savings vehicle that complements, or offers an alternative to, an occupational pension plan or workplace share scheme.
Like a standard Isa, corporate Isas enable employees who are resident in the UK and aged 16 or over to save money earning interest free of UK income tax.
An Isa can also encourage employees to start saving for retirement in an accessible and hassle-free way.
Tom McPhail, head of pensions research at Hargreaves Lansdown, says: “Very often, the reason people do not do what they should be doing when it comes to saving is because it all seems so complicated. With a corporate Isa, you can just tick a box and you know the money is being put aside for you.”
There are two types of corporate Isa: stocks and shares, and cash. Stocks and shares Isas dominate the corporate market, largely because corporate Isas tend not to be able to match the competitive cash Isa rates found on the high street.
Range of investments
Employees can invest up to £5,640 in a cash Isa for the 2012/13 tax year, which ends on 5 April 2013. They can opt for a range of investments for a stocks and shares Isa, including company shares listed on a stock market and corporate and government bonds.
Employers can offer employees corporate Isas on a collective basis and manage contributions either through payroll deductions or via individual employee contributions.
Corporate Isas are an attractive proposition to employees who belong to a company share scheme because they can mitigate their capital gains tax (CGT) liability by transferring their shares from the scheme to the Isa using a process known as an in specie transfer, rather than selling the shares out right, which is when CGT applies.
Hargreaves Lansdown’s McPhail says: “You can wrap it in alongside a pension, so you are putting a mediumto long-term savings plan in place that is going to work for employees, especially in the context of the decline of defined benefit (DB) pension schemes. It is also portable in that you can take your Isa with you, transferring it to an individual Isa if you leave the company.”
The only employer costs associated with providing corporate Isas relate to communication and employee education, especially in explaining issues such as contribution limits, the number of Isas an employee can have in any one year and the difference between a cash and equity product.
Jonathan Watts-Lay, director of Wealth at Work, says: “It may be webcasts and seminars or marketing material, but there will need to be an educational process.”
But employers first need to shop around for an appropriate corporate Isa provider, which should include an assessment of the free support and advice providers include as part of their service. Employers then need to consider how a corporate Isa will align with their existing benefits, including how it will integrate with, or complement, a pension.
Martin Palmer, head of marketing, corporate benefits at Friends Life, says: “They should also look at the flexibility of the platform. It is not just about the product, but the tools that support it.”
McPhail expects employers’ take-up of corporate Isas to be slow but steady. “The focus on savings that will accompany pensions auto-enrolment from this autumn could well be a catalyst,” he points out.
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