Government confirms ISA reforms

The Economic Secretary to the Treasury, Ed Balls, has announced that - following consultation with ISA providers - the Government's reforms to make the ISA regime simpler and more flexible for savers will come into effect a year earlier than originally planned, in April 2008.

The reforms announced alongside the Pre Budget Report 2006 include: extending ISAs indefinitely, with a guarantee that the overall annual investment will remain at least £7,000 to provide stability for savers and certainty for the industry; and bringing legacy PEPs within the ISA wrapper to enable investors to manage their funds more effectively, reduce administration costs for providers, and rationalise the savings landscape.

Meanwhile, the Mini/Maxi distinction within ISAs will be removed in order to simplify the regime, making it easier to understand and administer, and increasing the flexibility for savers.

Other measures include: allowing transfers from the cash component of ISAs into the stocks & shares component to encourage savers to diversify their assets and further promote share ownership; and allowing Child Trust Fund accounts to roll over into ISAs to encourage young people to maintain a saving habit into their adult years.

The change to allow Child Trust Fund accounts to roll over into ISAs on maturity will start to have effect when the first accounts mature in 2020.

15 July 2008 © Moneyextra.com

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