The annual individual savings account (Isa) allowance will be increased to £15,000 from 1 July 2014, according to Chancellor George Osborne in today’s Budget speech.
This will allow staff transferring exercised shares into an Isa from a maturing employee share plan (such as sharesave) to protect more of their gains over the tax-free limit, of £10,900 from April 2014, from capital gains tax (CGT).
The current limit is £11,520 for a stocks and shares Isa and £5,760 for a cash Isa.
From 1 July the two types of Isa will be merged in to a single new Isa taking both cash and shares.
Staff transferring shares from an employee share plan need to do so within 90 days in order to maintain the tax protection from CGT.
It’s encouraging to see that savers can benefit from a new breed of tax-free Isas with an allowance of £15,000, and the end to the absurd rule that only allows savers to transfer cash Isas into stocks and shares and not the other way round. This will boost the savings industry and allow basic-rate taxpayers to benefit from greater flexibility.
We welcome the fact that the Isa has finally been made simple and more relevant. Rather than investors having to worry about whether you go to a cash Isa or investment in stocks and shares, potentially becoming confused about the different levels, this has now been removed so that you can either hold cash, or investment, in the same account.
It’s been a long time coming, but finally the Chancellor has listened to our call to recognise the plight of savers. It’s high time that the Isa rules were changed so that those who would prefer to remain or switch to cash are not unfairly penalised.
As people get older and approach retirement many prefer to reduce their investment risk by switching to cash, so we commend the government for recognising this, as well as increasing the amount savers can save to £15,000.
However, a £15,000 Isa is of little benefit if the interest rates being paid are still derisory. We desperately need competition to return for rates to improve.
The complexity of modern working lives, combined with ever increasing life expectancy, means that the existing savings framework often don’t work. With an increased Isa allowance and more flexible pensions, savings can match more modern life styles where people change jobs more frequently, are with different partners and have different periods of economic activity. Employers have an opportunity and, possibly, an obligation to increase financial education for their employees as a result.
We welcome the raising of the value of funds that can be put into individual savings accounts to £15,000 annually, and the removal of the caps within the Isa distinguishing between cash and stocks and shares. It looks to be a reasonable assumption that the lifting of restrictions on pensions and Isas will make them more attractive as vehicles for general saving and retirement planning.
Of course, changes like this carry consequences and these new freedoms bring with them the challenge of how well people can cope with this new responsibility. This suggests that savers and investors will need to develop a stronger relationship with those advisers that they feel they can trust. This all represents a great opportunity for the public to take a more mature approach to their financial planning. However, probably never has it been truer that the price of (financial) freedom is eternal vigilance. Good advice and guidance will continue to attract a premium.
The much heralded increase in Isa savings limits to £15,000 is obviously good news for savers in general, but it’s of particular help to those who want to take up the option of transferring some of their shares from a [sharesave] scheme maturity within the permitted 90-day timeframe.