ISA top-up announced by Treasury

| December 6, 2011
ISA top-up announced by Treasury

The Treasury has announced plans to change ISA top-up rules to help strengthen consumer confidence in the security of the product.

Currently, ISA investors who lose their savings due to the collapse of a financial firm are unable to refill their annual allowance.

Any savings lost as a result of a firm failing are still counted as part of the amount that can be invested in an ISA annually.

In 2011, investment was limited to £10,680 in a tax-free ISA, but this will increase to £11,280 in April 2012.

Half of the amount invested can be in cash.

Under new rules proposed by the Treasury, savers would be allowed to top up again by investing an amount equivalent to the amount they lost, in a new account with another provider.

They would also be able to reinvest any compensation paid out if a stocks and shares ISA is affected by a financial firm’s failure.

The news has been welcomed by the Tax Incentivised Savings Association (TISA), which said it was a “common sense” move.

In related news, Halifax recently launched a Junior Stocks and Shares ISA, which tracks the performance of the FTSE 100 Index and allows parents to save for their children’s future.

The product follows the Government’s decision to extend tax-efficient savings for children.

The product will mature into an adult ISA once the child turns 18.

The Junior Stocks and Shares ISA is expected to attract parents wishing to set money aside to pay for their child’s education or to provide a deposit on a house when the child reaches adulthood.

However parents should remember there is an element of risk with a stocks and shares ISA.

While cash ISAs are just tax-free savings accounts, the money in a stocks and share ISA is invested and the investment can go down as well as up.

The Halifax Junior Stocks & Shares ISA invests in the Scottish Widows UK Tracker Fund.

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