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Will new Isa rules tempt you to try stocks and shares?

Stocks and shares graph

The individual savings account (Isa) is a rare success story in a much-maligned financial services industry. And the new Isa, with increased flexibility, could bring another wave of stock-market investors…

Government figures show that the number of Isa subscriptions has increased almost 60% in the past 14 years – from 9.2 millon in the 1999/00 tax year to more than 14.6 million in 2012/13. This increase can be directly attributed to the popularity of cash Isas, which are simply tax-free savings accounts.

Stocks and shares Isas, however, have failed to capture savers’ imagination in the same way. In fact, subscription levels have been falling – from 4.5 million in 1999/00 to 2.9 millon in 2012/13.

Two-way transfers introduced

This trend is perhaps the result of risk-aversion following a decade defined by two stock-market crashes, as well as a recession that has rendered the prospect of relying on savings all too real for many.

It also leaves the aspiration of a mass-investing culture, like the one that exists in the US, looking more elusive than ever. Yet, the markets have a lot to offer those seeking income and capital growth over the long term. And one rule change announced in the Budget could make stocks and shares Isas a more attractive proposition.

Previously, it has only been possible to transfer cash Isas into stocks and shares; now it will also be possible to transfer back the other way, without losing the tax benefits of an Isa.

So, if you’re a new investor, and you’re tempted to dip into the markets, you now know that you can retreat to the safety of cash if your circumstances change. A small tweak to the rules, greeted with little fanfare, but an important one nonetheless.

Would you consider a Stocks and Shares Isa following the Government’s changes?

No (43%, 282 Votes)

Yes (38%, 251 Votes)

Maybe (19%, 128 Votes)

Total Voters: 661

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Comments
Member

I made the mistake of investing in a stocks and shares ISA last year. I went for very well known “safe” companies, and 9 months later on its not worth 20% less than I’d invested.

All the new rules will get me to do is transfer the whole lot into a cash ISA as soon as the value is around the same as the amount I invested.

Yes I could have invested in funds but I don’t like the idea of paying someone to do nothing with my money. The software to run a tracker fund was probably written 10-15 years ago and they don’t change that much if done properly.

Member

Stocks and shares are a medium to long term investment – not for one or two years. If you need to access your savings at relatively short notice then they are not suitable – as William has seen, and we are all warned, they go down as well as up – usually down when you want your money out. But for money you can forget about, the stock market will give you a better return than cash deposits ever can. Use a good IFA to build a balanced portfolio if you don’t feel confident. Alternatively, do something active with your spare cash like buying and selling.

Member

I should point out that the yield I’m getting is around 7% so not too shabby when compared to the rates for Cash ISAs

Member

William, I can certainly understand your frustration. But as Malcolm suggests, the reality of investing in the stock market is that you need to be prepared for the possibility that your investments will lose value over relatively short periods of time.

Thankfully, this rule change means that those who have second thoughts can now transfer to the safety of a cash Isa.

Member
Graham says:
24 April 2014

I am selling my house and will invest some of the proceeds in the new ISA when the full £15k is available, I will invest totally in stocks and shares and add £15K per year until I retire (6 years). In addition I will seek other tax exempt investments such as adding to my SIPP and possibly buying a property in Spain to rent out and to finally retire to Spain where I will pay tax on my income. I am hoping that this strategy will enable me to obtain a good income in retirement with minimum tax liability. Only issue is that I may be branded as a tax avoider and demonised by this government.

Member

My main gripe about stocks and shares ISA has always been if you have shares already you can’t just transfer them into a Stocks and Shares ISA ( well that was what I was told by my bank). So you need to sell them, incurring commission costs and then transfer the cash into your account and then buy them back paying yet another set of fees, so you’re already on to a loser before you even start 🙁

Member
Edwin Jones says:
25 April 2014

Spot on!

Stocks and Shares ISAs are designed to keep financial advisors in Porsches!

I had been considering Bed & ISA this last tax year, but…

Say £10k shares, then 0.45% Annual Management Charges, the going rate from Hargreaves Lansdowne, is £45 (the same as their £45 cap, so no advantage from the cap).

Many shares like BG and Rolls only yield 1.5 – 2%, so, for the privilege of holding the shares in an ISA, you loose a quarter to a third of the yield – as well as any additional charges for DRIPs, etc…

It would be nice to think the CGT exemption might make up for all the charges…

A complete waste of time: you’re better off keeping the share certificate(s) at home.