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