Changes to the New ISA savings plan take effect
01/07/2014
The much anticipated New ISA (Individual Savings Account) savings rules have been introduced today, meaning that UK adults will be able to save up to £15,000 a year in the UK’s most popular tax-exempt savings plan.
The changes will give savers more flexibility over how their money is invested, as previous rigid rules have now been relaxed.
Before the 1st of July 2014, a saver could only invest £11,880 into an ISA this tax-year, and only half of this amount could be put into a Cash ISA.
Additionally, savers were not permitted to switch their savings freely between a Cash ISA and a Stocks and Shares ISA, as they were only able to switch funds from Stocks and Shares to Cash, but not vice-versa.
However, these restrictions have now been lifted and those looking to save in an ISA can now:
1. Save up to £15,000 this tax-year into an ISA
2. Save up to the full £15,000 ISA allowance into a Cash ISA if they wish
3. Transfer funds freely between a Cash ISA and a Stocks and Shares ISA
4. Anyone who is aged 16 or 17 can open a Cash ISA, although they are still not permitted to open a Stocks and Shares ISA
5. The Junior ISA annual savings allowance has increased to £4,000
Chancellor George Osborne, who introduced the new rules said he did so because: "We want to support savers at all stages of their life and make sure they have greater flexibility and choice over how they access their savings."
Extremely popular savings plan
The ISA is extremely popular, around 23 million adults, which is around half of the UK’s population, have an ISA.
The savings plan that has proven to be very popular within the south east if England, with recent figures showing that 50.0% of adults within they are currently saving into an ISA. It was also revealed that the amount of people that save into an ISA increases as they get older.
However, despite the new rules being hailed as good news for savers, some commentators have warned that some providers have started to pay lower rates since the new rules were announced in the Chancellors 2014 Budget speech.
Rachel Springall, spokeswoman for Moneyfacts claimed that the average rate for a one-year fixed ISA has fallen from 1.58% to 1.48%, whilst the typical rate on a variable cash ISA fell from 1.26% to 1.21%.
She said: "The falls in rates will likely cause much disappointment for savers who did not see a fruitful ISA season this year and have pinned hopes on the new limits to provide new deals so they can boost their income."
Need financial advice?
If you are unsure how you should invest your savings, or you would like some help in picking the best ISA to fit your individual circumstances, then ask one of our professionally qualified financial advisers a question online or by calling 0800 092 1245.
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