Julian Knight: Maybe the Treasury is finally cottoning on to value of ISAs

The funds keeping the UK savings culture afloat can also repair a lot of personal finance woes

When it comes to Individual Savings Accounts (ISAs), I do wonder if the Treasury realises what a good thing it has.

From their launch, ISAs have proved incredibly popular. You put the money into a savings account or into shares, and it grows tax free.

Tens of billions of pounds have been invested in ISAs, and the easily understandable tax-free wrapper has almost single-handedly kept the UK savings culture afloat.

In addition, it has created thousands of jobs in the fund management and banking industry.

Personally, I would adopt the ISA framework as the way forward for pension saving in this country – introduce a separate annual allowance for a "lifetime" ISA, for instance, which can be accessed a couple of times during your working life but the rest of the time remains locked away, growing for retirement.

But no matter how much I like to big up ISAs, I feel the Treasury – of whatever political colour – is not much of a fan.

When ISAs were introduced, the then Chancellor, Gordon Brown, placed a sword of Damocles over it, suggesting it was only a temporary construct. Fortunately, that was backtracked on.

Before the most recent Autumn Statement, there were rumours that total ISA savings were going to be capped at £100,000, thereby punishing long-term savers who may not be necessarily rich but have done the right thing throughout their working life.

Meanwhile, there has been the mishandling of Junior ISAs.

These JISAs were introduced to replace child trust funds (CTFs), which had frankly been a monumental mistake – bureaucratic social engineering at its worst.

Government officials would gift parents vouchers to be placed in CTFs, which would then hopefully grow over time.

Not only did this favour the financially very literate and those with money already but it also cost a small fortune.

As soon as the chill winds of credit crunch landed, CTFs were dead. JISAs, on the other hand, didn't enjoy any state handout, instead they were in essence a pared-down version of the successful and easily understandable adult ISA.

Parents understood them, and had confidence in them.

However, for some bizarre – and I can only account for this through the Treasury's reluctant embrace of ISAs – parents and product providers could not roll the two products together, making it far simpler to administer and to encourage proper competition in the sector.

As a result, JISAs have been a bit of a Cinderella product, not growing at the rate they ought.

Now finally at Christmas, the Chancellor has decided to allow money in CTFs to be transferred to JISAs. This means that parents will be able to get far higher rates than at present.

The best CTF is currently from Yorkshire Building Society and offers 3 per cent interest.

In contrast, the best rate on a JISA, available from Halifax, is double that at 6 per cent.

The rate earned on JISAs is the envy of standard ISA savers. What's more, JISAs tend to be much more simplistic products, and as a result the charges are lower or even non-existent – in sharp contrast to some CTFs, where the annual management fees are frankly scandalous.

With one leap, parents will be able to leap out of the bureaucratic, expensive universe of CTFs into JISAs. The only pity is they will have to wait until April 2015 to do it.

But this is great news, and let's hope it's a sign of the Treasury finally falling for ISAs. They could be a tremendous tool for sorting out much of this country's personal finance woes.

House price merry-go-round

My inbox is full of predictions for the 2014 housing market. I love these, because in my experience, they are nearly always totally wrong.

Most of the bodies issuing these estimates have to revise their figures midway through the year.

In the main, however, this year the estimates are roughly of the same sort – house prices to rise at around twice the level of inflation.

But the housing market normally exceeds predictions on the down and the upside.

Oddly enough, the only time this didn't happen was in the aftermath of the credit crunch when massive government and central bank intervention stopped the entire market falling off a cliff.

So am I going to offer any predictions for 2014? Not on your nelly – only that house prices will not be as forecast.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
News
A cleaner prepares the red carpet for the opening night during the 59th International Cannes Film Festival May 17, 2006 in Cannes, France.
newsPowerful vacuum cleaners to be banned under EU regulations
Arts and Entertainment
Loaded weapon: drugs have surprise side effects for Scarlett Johansson in Luc Besson’s ‘Lucy’
filmReview: Lucy, Luc Besson's complex thriller
Voices
Mosul dam was retaken with the help of the US
voicesRobert Fisk: Barack Obama is following the jihadists’ script
News
people
PROMOTED VIDEO
News
A polar bear’s diet is rich in seal blubber and half of its own body weight is composed of fat
i100
Life and Style
fashion David Beckham fronts adverts for his underwear collection
Travel
Flocking round: Beyoncé, Madame Tussauds' latest waxwork, looking fierce in the park
travelIn a digital age when we have more access than ever to the stars, why are waxworks still pulling in crowds?
Arts and Entertainment
Jeremy Clarkson has rejected criticisms of his language, according to BBC director of television Danny Cohen
tv
Extras
indybest
Arts and Entertainment
Judi Dench appeared at the Hay Festival to perform excerpts from Shakespearean plays
tvJudi Dench and Hugh Bonneville join Benedict Cumberbatch in BBC Shakespeare adaptations
Arts and Entertainment
tv
Sport
Is this how Mario Balotelli will cruise into Liverpool?
football
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Service Desk Analyst (Graduate, Helpdesk, Desktop, Surrey)

    Negotiable: Harrington Starr: Service Desk Analyst (Graduate, Helpdesk, Deskto...

    Service Desk Analyst (Graduate, Helpdesk, Desktop, Surrey)

    Negotiable: Harrington Starr: Service Desk Analyst (Graduate, Helpdesk, Deskto...

    Junior Quant Analyst - C++, Boost, Data Mining

    £25000 - £35000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

    Service Desk Analyst- (Desktop Support, Help desk)

    £25000 - £35000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...

    Day In a Page

    Air strikes? Talk of God? Obama is following the jihadists’ script

    Air strikes? Talk of God? Obama is following the jihadists’ script

    The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
    Ebola outbreak: Billy Graham’s son declares righteous war on the virus

    Billy Graham’s son declares righteous war on Ebola

    A Christian charity’s efforts to save missionaries trapped in Africa by the crisis have been justifiably praised. But doubts remain about its evangelical motives
    Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC

    Not even Jeremy Clarkson is bigger than the BBC, says TV boss

    Corporation’s head of television confirms ‘Top Gear’ host was warned about racist language
    Nick Clegg the movie: Channel 4 to air Coalition drama showing Lib Dem leader's rise

    Nick Clegg the movie

    Channel 4 to air Coalition drama showing Lib Dem leader's rise
    Philip Larkin: Misogynist, racist, miserable? Or caring, playful man who lived for others?

    Philip Larkin: What will survive of him?

    Larkin's reputation has taken a knocking. But a new book by James Booth argues that the poet was affectionate, witty, entertaining and kind, as hitherto unseen letters, sketches and 'selfies' reveal
    Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?

    Waxing lyrical

    Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?
    Texas forensic astronomer finally pinpoints the exact birth of impressionism

    Revealed (to the minute)

    The precise time when impressionism was born
    From slow-roasted to sugar-cured: how to make the most of the British tomato season

    Make the most of British tomatoes

    The British crop is at its tastiest and most abundant. Sudi Pigott shares her favourite recipes
    10 best men's skincare products

    Face it: 10 best men's skincare products

    Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
    Malky Mackay allegations: Malky Mackay, Iain Moody and another grim day for English football

    Mackay, Moody and another grim day for English football

    The latest shocking claims do nothing to dispel the image that some in the game on these shores exist in a time warp, laments Sam Wallace
    La Liga analysis: Will Barcelona's hopes go out of the window?

    Will Barcelona's hopes go out of the window?

    Pete Jenson starts his preview of the Spanish season, which begins on Saturday, by explaining how Fifa’s transfer ban will affect the Catalans
    Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

    We know all too much about the cruelty of Isis – but all too little about who they are

    Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
    Neanderthals lived alongside humans for centuries, latest study shows

    Final resting place of our Neanderthal neighbours revealed

    Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
    Scottish independence: The new Scots who hold fate of the UK in their hands

    The new Scots who hold fate of the UK in their hands

    Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
    Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

    Blight club: Britain's ugliest buildings

    Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape