ISA changes don’t go far enough

Fidelity FundsNetwork is calling on the government to make further changes to ISA legislation to build on the changes set to be introduced on 6th April 2008.

While the changes already announced are welcome, FundsNetwork believes they do not go far enough to address the key issues:

Annual ISA Limit: FundsNetwork believes the newly proposed limit of £7,200 falls far short of what the limit should be – had the ISA limit risen with the rate of inflation, it would now stand at over £8900. FundsNetwork would like to see a limit of £10,000 introduced, OR a commitment from the government to a rising limit – £8,400 from 2009, £9,600 from 2010, £10,800 and so on – figures that are all divisible by 12 for monthly savers;

Flexibility to move to cash: The new ISA rules allow the transfer of money held in cash ISAs to be moved into stocks & shares ISAs. This is a very encouraging change, but FundsNetwork would also like to see investors have the ability to move money held in stocks & shares ISAs into cash ISAs. This would provide much needed flexibility to investors who are in or approaching retirement.

David Dalton-Brown, Head of Fidelity FundsNetwork said: “While we welcome the impending ISA changes, they simply do not go far enough. There is a mismatch between the government’s stated aims and their actions – while encouraging people to save for the future, the support and facilities that consumers need to do so are simply not there.

“The annual ISA allowance falls far short of what we believe it should be – either an increased limit to £10,000 or some commitment from the government that the limit will increase on an annual basis.

“It’s encouraging that investors will soon be able to transfer holdings from a cash ISA to a stocks and shares ISA, but what about investors who need to move the other way? This additional flexibility is much needed particularly for those investors who are in or approaching retirement.

“With the end of the current tax year imminent, we urge the government to keep up momentum and consider further changes for 2009.”