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Dec 2013

Autumn Statement 2013 – How does it affect ISAs?

George Osborne's fourth Autumn Statement has proved to be something of mixed blessing for ISA savers. On the one hand, Osborne confirmed plans to raise the annual ISA limit in line with inflation - but on the other hand many anticipated changes, such as those affecting child trust funds, failed to materialise.

ISA limit to increase to £11,880 in 2014

The biggest announcement in terms of ISAs was that the annual limit would increase as expected - rising to £11,880 from April 2014. This represents an increase of £600 from the current ISA allowance of £11,280. As is the case under the current ISA rules, savers will be able to put the full amount into a stocks and shares ISA, or save a maximum of £5,940 in a cash ISA and invest the remaining £5,940 in a stocks and shares ISA. While the increased allowance is likely to be welcomed, those who have called for the cash ISA limit to be increased to match the investment ISA limit are likely to be disappointed that there has been no move in this direction. However, the fact that no mention was made of the rumoured £100,000 lifetime ISA cap was welcome news.

No transfers from child trust funds to junior ISAs

The amount that can be saved in Junior ISAs will increase for 2014/15, from £3,720 to £3,840 with the same increase applying to Child Trust Funds. However, Osborne failed to take the much-anticipated step of removing the prohibition on transfers from Child Trust Funds to Junior ISAs. The lack of movement on the transfer ban means that the six million children with child trust funds face another year of lower rates.

Experts respond

Many industry experts had expected the child trust fund transfer ban to be lifted, and expressed surprise that this was not the case. Sarah Lord, a financial planner at Killik, said: "It is disappointing that the Government has not announced a change to the rules to allow CTFs to be transferred to Junior ISAs. This means there continues to be total disparity between CTFs and Junior ISAs." Meanwhile, Danny Cox of Hargreaves Lansdown called the decision a "missed opportunity" and added that "running two separate schemes adds complexity and doesn't encourage a savings culture."

Darius McDermott, managing director at Chelsea Financial Services, agreed, saying: "I don't see why a child's date of birth should stop them getting the best deals. It seems incredibly unfair and the Chancellor has missed an opportunity to finally sort the mess out…let's hope they see sense before the March Budget."

The tax efficiency of ISAs is based on current tax law and there is no guarantee that tax rules will stay the same in the future.

No news, feature or comment should be seen as a personal recommendation to invest. If you are at all unsure of the suitability of this type of investment, both in respect of its objectives and its risk profile, you should seek independent financial advice. 

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