Speculation is growing that the Government may include reform to Individual Savings Account (Isas) on the forthcoming Autumn Statement — although it looks unlikely that this will include changes to Lifetime Isa limits to reflect higher house prices.
Many are expecting changes to be aligned to the Chancellor’s productive finance objective and boost investments into the smaller start up companies int he UK economy. These over-riding theme has been driving a number of changes in the workplace pension sector.
A number of providers now include both Isas and Lisas within their workplace savings propositions.
Aegon pensions director Steven Cameron says: “The pre-Autumn Statement rumour mill has gone into overdrive over possible Isa reforms. If the Chancellor does announce changes here, I expect they’ll be firmly focused on encouraging greater investment in stocks and shares, possibly with a particular UK focus.”
He pointed out that there has been calls for the rule changes that will effectively merge cash Isas and stocks and shares Isas.
Cameron says: “While presented as a simplification, this is likely to be far from simple or quick to implement and just doesn’t look feasible for next April, the last tax year end before the General Election.”
He adds:“Another is to increase the annual investment limit to say £30,000. This would appeal to more wealthy investors who are already using up their £20k allowance and facing higher CGT bills when selling investments outside Isas and pensions.
“But limiting this to stocks and shares Isas would be more complex, and any attempt to offer the extra allowance solely for UK stocks and shares investments would be particularly tricky and controversial.”
Cameron adds: “There have also been calls for changes to the rules on Lifetime Isas. These have not proven as popular as perhaps hoped when originally launched. Possible changes could include raising the maximum age for taking out a Lisa from the current age of 40, or allowing contributions to continue after age of 50.
“The £4000 annual investment limit could be raised as could the maximum eligible house price, which would help those living in areas where house prices are particularly high. While some have called for the ‘exit penalty’ to be removed where proceeds are not used for house purchase or retirement, I see this as unlikely.
“The upfront bonus is designed to encourage investing for house purchase or retirement purposes. If this were simply taken back without any extra penalty if encashed for other purposes, we could see Lisas being taken out simply as alternatives to other Isas, with significant upfront costs to Government.”
Cameron added: “Allowing individuals to save in more than one Isa per year is also rumoured to be under consideration. This might be welcomed by a wider group of savers and investors, but does come with the risk of failure to self-certify.”
“While the Chancellor will no doubt want to use this Autumn Statement and next Spring’s pre-election Budget to wow the voting population, any changes need to be properly thought through to ensure they can realistically be delivered by next April without unintended consequences and additional complications.”
The Autumn Statement will be delivered on November 22.
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