Massive shortfall in use of stocks and shares ISAs

Research by Lincoln Unit Trust Managers reveals that as the end of the tax year approaches, UK adults are yet again letting tens of billions of pounds worth of tax efficient stocks and shares ISA entitlement go to waste.

In the 10 months from April 2007 to end-January 2008, just £6.864 billion were invested in both mini and maxi stocks and shares ISAs in total. It also meant UK adults had invested on average less than 5% of the equivalent of their mini stocks and shares ISA entitlement.

At present, UK adults can invest up to £7,000 in a stocks and shares maxi ISA, or up to £3000 in a cash or £4000 in a stocks and shares mini ISA.

Will Hale, Head of Distribution at Lincoln Financial Group, commented: “People need to save more to give themselves more financial security and meet their long-term financial goals. No doubt people have been put off investing in equities because of the uncertainty on financial markets but equities tend to outperform in the longer term and people should be making more use of their stocks and shares ISAs to meet their financial goals.”

The ISA and PEP rules will change from April. The maximum amount that can be invested in ISAs in total in a tax year will rise to £7,200 and the distinction between maxi and mini ISAs will be removed. ISAs will become either cash ISAs or stocks and shares ISAs. Investors will be able to transfer cash ISAs into stocks and shares ISAs with no impact on their annual allowances.

Will Hale added: “It is wise for people to keep cash in a tax efficient wrapper, and it is advisable for everyone to have three months salary in cash. But many people may well have accumulated large cash holdings that they could get a better return from over the long term by transferring into stocks and shares ISAs in the new tax year.”