The Launch Of The NISA
Following the announcements in this year’s Budget, the 1st July 2014 sees the launch of the latest version of tax-efficient savings vehicles, the New Individual Savings Account (or NISA), writes Gareth Tregidon, Financial Planning Manager at Bevan & Buckland Chartered Accountants.
As a way of encouraging both savings and investment the Conservative Government launched Personal Equity Plans (PEPs) and Tax Exempt Special Savings Accounts (TESSAs) in 1990. These were “simplified” in 1999 by the Labour administration, which then replaced PEPs and TESSAs with a single new product – the ISA. Within this new plan we had a distinction between cash deposits and investments, and it also introduced the “Mini” and “Maxi” ISA. Whilst the “Mini” and “Maxi” terminology disappeared in 2008, many people still refer to ISAs in this way as it is easier to understand the various investment limits.
Prior to 1st July 2014 we have had an overall ISA investment limit, which applies to the Tax Year and is updated annually. For 2014-2015 this was £11,880, increased from £11,520 in 2013-2014. Up to half of this could be invested in a Cash ISA (£5,940), with the balance available for use in an investment ISA. So for example if you invested £3,000 in a Cash ISA, you could then invest up to £8,880 in an investment ISA. Thankfully these different limits and distinctions are now about to disappear with the launch of the NISA.
With effect from 1st July 2014 this changes to a single overall investment limit of £15,000. This can be all in a Cash ISA, all in an Investment ISA, or any combination of the two in whatever proportions you want.
Another important change is the ability to alter the way you invest in the future.
Until now, if you invested in cash you could switch at a later date into investments and still retain the ISA status. However, you could not go from investment to cash. So if you had an Investment ISA that you wanted to change, your only option was to cash it in, so losing the ISA status. From 1st July 2014 this has changed, and you can now transfer from investment to cash, or vice versa, whenever you wish.
These changes suggest that providers will need to develop more flexible ISA products in the future if they want to attract and then retain your money for longer periods. Some have started to do this already, however we expect to see more launching in the next few months.
Over the last few years fund management groups have also been changing the way they charge for their funds. Whereas you previously had a single fund charging structure, most now have multiple ones depending upon the company you use to access the funds. Whilst the vast majority of these are now significantly cheaper than before, finding the best fund/product combination for your requirements has increased the need for advice, whether online or by using an adviser.
If you have an investment portfolio and would like to know more about taking advantage of these changes, or lower cost ways to access funds, contact us for a free, no obligation initial discussion.
Gareth Tregidon CFPCM
Bevan & Buckland
Gareth Tregidon is manager of Bevan & Buckland’s Financial Planning Department, which operates from the firm’s Swansea, Pembroke and Haverfordwest offices. The department provides fee-based advice to personal and business clients, both from within the firm and elsewhere.
Gareth is a Certified Financial PlannerCM and an accredited Later Life Adviser with the Society of Later Life Advisers (SOLLA). He is former Chairman of the Institute of Financial Planning in South Wales, and an assessor for the internationally recognised Certified Financial PlannerCM licence.
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