ISA reforms to encourage saving

The Economic Secretary to the Treasury, Kitty Ussher today laid Regulations that will implement a reform package for Individual Savings Account (ISAs).

The package of measures will make ISAs more attractive by increasing certainty, making the regime simpler and more flexible, and by increasing how much people can save in an ISA.

Key elements of the reform package, which comes into effect from 6 April 2008, are:

ISAs are available indefinitely;

All Personal Equity Plans (PEPs) will automatically become stocks and shares ISAs;

Savers can transfer money saved in cash ISAs into stocks and shares ISAs;

A new structure and limits, removing the Mini/Maxi distinction.

From April 2008, every adult will have an annual ISA investment allowance of £7,200. Up to £3,600 of that allowance can be saved in cash with one provider. The remainder of the £7,200 allowance can be invested in stocks and shares with either the same or another provider.

Commenting on the reforms, Economic Secretary, Kitty Ussher said: "The ISA has been successful in helping more people to save in a tax-efficient way. Over 17 million people now invest in an ISA, more than double the number who ever held a TESSA or PEP. These reforms - to come into effect in April next year - will build on the success of ISAs, making them even more attractive by allowing people to save more, and by being more flexible and simpler to use."