Financial advice

The facts on new ISA rules

Individual Saving Accounts (ISA) are one of the most well known vehicles for saving for the future. However from 6 April the ISA rules are changing. ASCL's financial advice partner LV=Frizzell and its chosen provider for independent financial advice LighthouseTemple, have put together the following information to help members understand the changes and how it could effect them.

What are my ISA investment options from April 2008?

From April 2008, ISA savers will be able to invest in two separate ISAs each tax year: a cash ISA and a stocks and shares ISA. Mini and maxi ISAs will no longer exist.

The annual ISA investment allowance will rise to £7,200 per tax year. Up to £3,600 of that allowance can be saved in cash with one provider. The remainder of the £7,200 can be invested in a stocks and shares ISA with either the same or another provider. This means that, for example, you can choose to save £1,000 in a cash ISA with one provider and £6,200 in a stocks and shares ISA with a different provider.

What will happen to existing ISAs?

Mini cash ISAs, TOISAs and the cash component of a maxi ISA will all be reclassified as cash ISAs. Mini stocks and shares ISAs and the stocks and shares component of a maxi ISA will be reclassified as stocks and shares ISAs. Personal Equity Plans (PEPs) will automatically become stocks and shares ISAs.

Will I have to sign any new forms if I want to continue paying into my ISA?

No, as long as you:

• saved in that ISA in the previous tax year

• signed a continuous application form for that ISA

• have not already saved in another ISA of the same type (cash or stocks and shares) during the tax year.

How much can I transfer from my cash ISA to a stocks and shares ISA?

From April 2008 you will be able to transfer some or all of the money you saved in previous tax years without affecting your annual ISA investment allowance. Savers will also be able to transfer money saved in the current tax year. Such transfers must be the whole amount saved in that tax year in that cash ISA up to the day of the transfer. These transfers are subject to the terms and conditions of the ISA providers.

How do I transfer the money in my cash ISA to a stocks and shares ISA after April 2008?

In exactly the same way you would transfer your ISA to another provider. You will need to select the stocks and shares ISA provider that you want to have your ISA with. This can be an existing provider if they offer a stocks and shares ISA, or you can appoint a new provider. You then ask the new provider to arrange the transfer.

Remember however that you must not withdraw the money and invest it in a stocks and shares ISA yourself, as it will count against your annual ISA investment allowance.

Although the chancellor has suggested that the new ISA rules are a simplification of the ISA regime they can still present a challenge to investors, especially in terms of the assets to be included in a stocks and shares ISA and ensuring that you get the best rate for a cash ISA.

Investors should consult an independent financial adviser for appropriate advice regarding this important investment decision. ASCL members are welcome to contact the LighthouseTemple Client Services Team on 0800 0858590.