Individual savings accounts (ISAs)
The latest HMRC data on ISA contributions show that many people are taking advantage of tax-efficient saving, although there has been a fall in the popularity of cash ISAs.
HMRC published its latest statistics for individual savings accounts, as was, they now being called ‘New’ ISAs (NISAs). These could help explain why George Osborne chose to create the NISA, with higher contribution limits and greater investment flexibility – it may not actually cost him much.
The more interesting points to emerge from the numbers are:
• The Great British public may at last be falling out of love with cash ISAs. In 2013/14, 10.5 million accounts were subscribed to – nearly 1.2m fewer than in 2012/13. Given the rock-bottom interest rates that were on offer, this is no real surprise.
• By contrast stocks and shares ISAs gained in popularity marginally, with 3.0 million accounts subscribed to, up 68,000 on 2012/13.
• Junior ISAs, which you can contribute to for children, have not really taken off yet with 432,000 subscriptions in 2013/14 (although up appreciably from 296,000 the previous year).
• Although Junior ISAs cannot be cashed in until the child is age 18, so will remain invested for a number of years, 75% of the amount invested was simply left on cash deposit – usually giving a return less than inflation at present.
• Cash ISA holdings at April 2014 amounted to £228.5 billion.
• The total amount held in stocks and shares ISAs as at April 2014 was £241.1 billion.
• It would appear that the introduction of AIM shares as an allowable holding in ISAs from 5 August 2013 has resulted in £4.4 billion of investment. It would seem that people are either being very adventurous with their investments or looking to save inheritance tax.
As listeners to BBC Money Box will have heard recently, cash investment in NISAs has attracted over £5bn since the limit increased to £15,000 on 1 July.
At the same time there has been an average 0.34% interest rate cut by 20 of the leading cash ISA providers. It says a lot about demand for customers’ deposits that for now the best instant access, bonus-free cash NISA is from National Savings & Investments, who are offering 1.5%.
What all these figures show us – and apologies if I have blinded you with numbers – is that millions of people have recognised the sense of investing in ISAs.
If you are not maximising your £15,000 investment limit into the NISA, you should seriously consider the merits of doing so.
The choice of where you invest your NISA can make a huge difference to your returns. Also, one criticism of NISAs has been that they are not ‘tax-efficient’ as far as inheritance tax is concerned.
If this is an issue for you, it may now be possible to do something about it.
I am happy to discuss any aspects of NISA investment or the inheritance tax situation.
Please just get in touch and we can arrange a time to have a chat about them.
Paul.
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