The Chancellor’s last three budgets included some positive (and long-awaited) news for savers, namely: Pensioner Bonds, the Help to Buy ISA and the flexible ISA. George Osbourne also recently introduced the Personal Savings Allowance (due to come into effect April 2016) meaning savers can earn up to £1,000 in tax-free interest on savings.
Although great news for savers, this proposed allowance has raised some concerns within the finance industry. Since they were launched in April 1999, ISAs have always been the most tax efficient way to save, so should savers continue with their ISAs when they can receive up to £1,000 tax free with other savings accounts?
It is has been a long held view amongst many savers that ISA’s should be considered within a savings portfolio. But, despite the fact that millions of savers have benefitted from the tax benefits, are they still relevant? My immediate response is that they’re still attractive to savers and should always be considered. They’re also highly flexible as they now include a high annual subscription limit (£15,240 for 2015/16) with varying levels of risk depending on the saver’s preference, thereby appealing to new investors starting out on their savings journey and to more seasoned savers alike.
For savers looking to expand their investment portfolio and considering their savings options, an ISA account may well be worth some extra research and attention. While the Personal Savings Allowance seems generous, if interest levels were to increase, accruing interest on your savings would become more likely and could push you over the tax-free bracket. With all saving plans, individuals should consider how they can future-proof any savings.
A new Government always brings new tax regimes and this year is no exception. ISAs or the Personal Savers Allowance could potentially disappear in five years time after the next election. However, with ISAs celebrating their 16th year and with over 5,000,000 subscribers the likelihood of them being discontinued could well be slim.
As with all things in life, it rarely proves successful to put all your proverbial eggs in one basket. With this in mind, choice is the savers greatest asset and making their savings as tax efficient as possible should be a key consideration of any decision.