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BOOST FOR ISA SAVERS

21 March 2000

Keeping this year's £7,000 subscription limit for a further year will give savers the chance to save more tax free, Chancellor Gordon Brown announced today.

This means that the previously planned reduction in the ISA limit to £5,000 for 2000-01 will be deferred, giving people the opportunity to save more tax free.

The Chancellor made his announcement as Inland Revenue figures showed that around £17.3 billion had been put into ISAs during their first nine months.  This is an increase of around 40 per cent on the estimated £12.2 billion put into PEPs and TESSAs in the same period last year.

The Economic Secretary Melanie Johnson said:

?ISAs have got off to an excellent start, and have really caught the imagination of those wanting to save.  Savers have already put over £17 billion into ISAs in just nine months.  Nearly 6.7 million accounts have been opened.

That is very encouraging but we wish to see still more being saved.  The measure announced today will give what is already a successful scheme a further boost, resulting in even more tax free saving.?

DETAILS

1.For the tax year 1999-00 savers can subscribe up to £7,000 overall of which no more than £3,000 may go into cash and £1,000 into life insurance. Originally these limits were going to be reduced for the tax year 2000-01, and later tax years, to up to £5,000 overall of which no more than £1,000 could go into cash. This planned decrease in the limits will now be deferred until the tax year 2001-02.

2.The review of the operation of ISAs will start in April 2000, after ISAs have had the chance to be up and running for a whole year. The review will involve discussions with representatives of the savings industry and look at such operational issues as:

  • resolving any problems encountered during that first year of operation;
  • the possibility of bringing PEP rules on issues like qualifying investments and phone instructions into line with the more flexible rules for ISAs.

3.The ISA take up figures for the nine months from 6 April 1999 to 5 January 2000 show:

  • around £17.3 billion paid into a total of nearly 6.7 million ISA accounts during that period;
  • over £8.5 billion paid into mini ISAs, including:
    • almost £7.7  billion into cash
    • over £820 million into stocks and shares
    • around £34 million into life insurance
  • over £8.7 billion paid into maxi ISAs, including:
    • over £8.2 billion into the stocks and shares component
    • over £500 million into the cash component
    • around £10 million into the life insurance component.

4.The amount put into stocks and shares over the nine month period exceeds that put into cash. This was not the case after the first three or six months.

5.These figures show an increase of around £4.6 billion and 1.5 million accounts over the figures for the previous account 6 July to 5 October 1999.  The figure of £4.6 billion also exceeded significantly the figure of £3.2 billion for subscriptions to PEPs and TESSAs in the comparable quarter last year.          

NOTES FOR EDITORS

1.The cost of the retention of the existing ISA subscription limits for a further year will be £40 million in 2000-01 and £70 million in 2001-02.

2.Early consultation will take place with representatives from the savings industry on the extent of any additional administrative costs arising out of the deferral of the planned reduction in ISA subscription limits.

3.Regulations retaining the current ISA limits for a further year were laid before the House of Commons today.  The change in the limits will be available from 6 April 2000. The new regulations are the Individual Savings Account (Amendment) Regulations 2000.  They will be available from The Stationery Office Limited shortly, and will be available on the Inland Revenue website.

INLAND REVENUE PRESS OFFICE

Media enquiries to: 020 7438 6692/6706/7327 (Out of hours: 07860 359544)

Non-media enquiries to: 020 7438 6420/6425 (Office hours only)

External links

 

Individual savings accounts

Period ending Number of Amounts subscribed (£ million) Average
accounts  Stocks and shares  Cash  Life insurance   All 

subscription 

 

(cumulative from 6 April 1999)

 

 

 

 (thousands) component component component components per account (£)

5 January20001

 

 

            
Mini ISAs Stocks & shares 947       826    -  -  826         870 
Cash    3,201         -   7,693    -  7,693    2,400    
Life insurance 83 - - 34 34 410
Total    4,231       826    7,693    34    8,554        
       
Maxi ISAs       2,438       8,203    507    10    8,720    3,580       
Total       6,669     9,029   8,201   44   17,274        


1  Provisional.

Notes:

(a)     Totals may not equal the sum of the individual components due to rounding.

(b)     Average subscriptions are rounded to the nearest £10.