Budget: Call to streamline ISA market is ‘pre-emptive strike’ on IFISAs
Stocks and shares firms have been accused of a ‘pre-emptive strike’ against Innovative Finance ISAs (IFISAs) after calls to streamline the ISA market.
Ahead of the forthcoming Budget on 15 March, Sarah Coles, head of personal finance at fund supermarket Hargreaves Lansdown, suggested that Chancellor Jeremy Hunt combine ISA products to make it easier for people to choose.
“If Jeremy Hunt was to roll Child Trust Funds into junior ISAs, bring help to buy ISAs into the lifetime ISA, and combine IFISAs with stocks and shares ISAs, it would keep people’s options open while striking a better balance,” she said.
“It would also make sense to allow people to subscribe to as many ISAs of the same type as they like in any year. There are no restrictions on the number of different pensions you can contribute to each year (as long as you stay within the annual allowance) so why restrict the number of ISAs? This would also iron out needless confusion – such as the fact you can’t currently put money in a help to buy ISA and a separate cash ISA in the same year.”
But Bruce Davis, who lobbies on behalf of the peer-to-peer lending industry in his role as director of the UK Crowdfunding Association, disagreed with Coles’ proposal.
“We get this message every year at around this time, but I don’t believe it is positive for the overall ISA brand,” he told Peer2Peer Finance News. “Clearly the bigger firms want to attract investment into stock and shares ISAs and away from IFISAs.
“It’s a pre-emptive strike, and it’s not good for the ISA market in general.
“In fact, in previous years we have seen positive moves from investors away from stocks and shares ISAs, and into IFISAs.”
He added that IFISAs had a positive impact on the economy, providing real economic benefits in funding new business start-ups, housing development and green projects.
“It’s important to ensure a flow of investment to these projects,” Davis said.
“Besides, stocks and shares ISAs address a different set of financial needs, and I don’t believe there’s confusion about what they are for. It’s not a confusing market. If anything, the competition from the IFISA is good for the whole ISA market. Just because IFISAs are a smaller segment, it doesn’t mean it’s not an important one.”
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However, Neil Faulkner, managing director and head of research at P2P research and ratings firm 4thWay, thought some change would be beneficial.
“This far into the 21st century, I see no reason why it’s not possible to combine different types of ISA into one and allow multiple ISAs of the same type, while maintaining the overall annual limits on new contributions,” he said.
Faulkner also made the point that the ‘one IFISA limit’ is a limit on the number of IFISAs that can hold new funds, not a limit on the number of new accounts opened and not on older money that you transfer over to new accounts.
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“IFISA investors who want to split an existing ISA pot from prior tax years among multiple new IFISAs just need to find out whether their existing ISA provider will allow them to partially transfer ISA money out and what the cost is,” he said.
He added that IFISA providers that allow partial transfers out for free include Loanpad, Proplend, Invest & Fund, Lendwise, Assetz Exchange, CapitalStackers and Sourced Capital.
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