DIY Investor Magazine
/
March 2014
14
SO MUCH ‘NISA’
In his 2014 Budget George Osborne delivered the
biggest shot in the arm to DIY savers and investors
in living memory; in addition to driving a coach and
horses through the pensions industry and abolishing
the 10% tax on savings Osborne announced the New
ISA (dubbed the NISA) – a simplified tax efficient
wrapper that allows greater flexibility in terms of the
combination of cash and stocks and shares that can be
held - and increased maximum annual subscriptions to
£15,000.
ISAs are a powerful weapon in the DIY investor’s
armoury and those that have been put off by the low
rates of interest paid by Cash ISAs in recent years may
decide that now is the time to take advantage of the
flexibility and increased range of investments available
through a NISA.
Whilst Cash ISA investments have been falling, trade
body the Investment Management Association has
identified that significantly more money has been
invested in stocks and shares ISAs as investors sought
higher returns.
Fully subscribed ISAs with returns compounded over a
number of years can deliver a sizeable pot and many
prefer the flexibility an ISA wrapper delivers as a
vehicle for their retirement planning.
With effect from 1st July investors can transfer a stocks
and shares ISA into a cash ISA which means that those
that had previously plumped for the safety of a cash
product may consider taking advantage of the potential
for higher returns in the stock market, knowing they
can transfer the entire amount to cash at any point in
the future – converting a six-figure ISA into a tax-free
income stream could be a very attractive option to
supplement income in retirement.
In addition, the new rules give stocks and shares
investors even more flexibility on what they can invest
in. Under the new rules investments such as short-term
bonds or cash funds now qualify for inclusion in an
NISA and DIY investors can now invest in very low-risk
bonds or gilts, which may provide a better return on their
money than cash, while also avoiding the need to transfer
to a cash ISA.
The Government is also consulting on the admission of
peer to peer loans to the list of NISA eligible investments.
Cash ISAs will still have a role for savers needing an
accessible and certain pool of money or saving towards
a fixed financial objective and are also useful for older
people looking to generate a tax-free income.
Those saving for children will appreciate that the annual
subscription has been increased to £4,000 and overall,
with the new rules effectively removing the need to
choose between a savings or investment strategy, ISA
investing has become far more attractive.
DIY INVESTOR MAGAZINE’S
GUIDE TO THE NISA:
HOW IS THE NEW ISA DIFFERENT TO
THE CURRENT ISA?
From 1st July all existing ISAs and any future
contributions will fall under the New ISA rules, which are
more generous and more flexible than the existing ISA.
The yearly allowance increases by £3,120 from the
current £11,880 to £15,000 which can have a substantial
impact on the value of an ISA account over time. Even
without a provision for future increases in the allowance,
investing fully into a NISA each year could result in a
portfolio worth more than £250,000 in only 12 years.*
CONVERTING A SIX-FIGURE ISA INTO A
TAX-FREE INCOME STREAM COULD BE A
VERY ATTRACTIVE OPTION TO SUPPLEMENT
INCOME IN RETIREMENT.
STEVE HAYSOM LOOKS FORWARD TO
THE INTRODUCTION OF THE NEW ISA
