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.

Compare with the Independent: See how much you could save by switching credit cards. Compare now

Suggested Topics
Voices
A downbeat David Moyes looks for answers during Manchester United's 2-0 loss at Everton
voicesMoyes' tragedy is one the Deputy PM understands all too well, says Matthew Norman
News
Matthew Mcnulty and Jessica Brown Findlay in 'Jamaica Inn'
mediaHundreds complain over dialogue levels in period drama
Arts & Entertainment
Rocker of ages: Chuck Berry
musicWhy do musicians play into old age?
Arts & Entertainment
With Jo Joyner in 'Trying Again'
tvHe talks to Alice Jones on swapping politics for pillow talk
VIDEO
News
Jilly's jewels: gardener Alan Titchmarsh
peopleCountry Life magazine's list of 'gallant' public figures throws light on what it means to be a gentleman in the modern world
Sport
John Terry goes down injured in the 70th minute
sportAtletico Madrid 0 Chelsea 0: Blues can finish the job at Stamford Bridge, but injuries to Terry and Cech are a concern for Mourinho
Student
student
News
<b>Rebecca Adlington</b>
<br />This, the first British swimmer to win two
Olympic gold medals in 100 years, is the eversmiling
face of the athletes who will, we're
confident, make us all proud at London 2012
peopleRebecca Adlington on 'nose surgery'
Arts & Entertainment
tvJudge for yourself
Life & Style
tech
Life & Style
Tough call: is the psychological distress Trott is suffering an illness? (Getty)
healthJonathan Trott and the problems of describing mental illness
Life & Style
23 April 2014: Google marks St George's Day with a drawing depicting England's patron saint slaying a fire-breathing dragon
tech
Life & Style
On the dogwalk: a poodle on the runway during a Mulberry show in London
fashionThe duo behind Asos and Achica have launched a new venture offering haute couture to help make furry companions fashionable
News
peopleEmma Appleton says photographer said he would shoot her for magazine if she slept with him
Extras
indybest
News
peopleRevealed: Goop.com's losses - and the pay rises
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    C# .NET WPF GUI Developer (LINQ, MVVM, SQL)

    £40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: C# .NET ...

    Application Support, Technical Support, Trading System Tech

    £50000 - £60000 per annum + Bonus, Benefits & Training : Harrington Starr: A l...

    Business Analyst Energy Trading Implementation (Energy/Oil/Gas)

    £500 - £750 per day: Harrington Starr: Harrington Starr are urgently recruitin...

    Back-Office Calypso Business Analyst - Europe - 6 Months - £600

    £500 - £650 per day: Harrington Starr: Our client is a leading financial servi...

    Day In a Page

    Brits who migrate to Costa del Sol more unhappy than those who stay at home

    It's not always fun in the sun: Moving abroad does not guarantee happiness

    Brits who migrate to Costa del Sol more unhappy than those who stay at home
    Migrants in Britain a decade on: They came, they worked, they stayed in Lincolnshire

    Migrants in Britain a decade on

    They came, they worked, they stayed in Lincolnshire
    Chris Addison on swapping politics for pillow talk

    Chris Addison on swapping politics for pillow talk

    The 'Thick of It' favourite thinks the romcom is an 'awful genre'. So why is he happy with a starring role in Sky Living's new Lake District-set series 'Trying Again'?
    Why musicians play into their old age

    Why musicians play into their old age

    Nick Hasted looks at how they are driven by a burning desire to keep on entertaining fans despite risking ridicule
    How can you tell a gentleman?

    How can you tell a gentleman?

    A list of public figures with gallant attributes by Country Life magazine throws a fascinating light on what it means to be a gentleman in the modern world
    Pet a porter: posh pet pampering

    Pet a porter: posh pet pampering

    The duo behind Asos and Achica have launched a new venture offering haute couture to help make furry companions fashionable
    A History of the First World War in 100 moments: The mutiny that sent a ripple of fear through the Empire

    A History of the First World War in 100 moments

    The mutiny that sent a ripple of fear through the Empire
    Hot stuff: 10 best kettles

    Hot stuff: 10 best kettles

    Celebrate St George’s Day with a nice cup of tea. Now you just need to get the water boiled
    Sam Wallace: Why Giggs is perfect fit as Manchester United boss... in the longer term

    Sam Wallace

    Why Ryan Giggs is perfect fit as Manchester United boss... in the longer term
    Renaud Lavillenie: The sky's the limit for this pole vaulter's ambitions

    Renaud Lavillenie: The sky's the limit for this pole vaulter's ambitions

    Having smashed Sergei Bubka's 21-year-old record, the French phenomenon tells Simon Turnbull he can go higher
    Through the screen: British Pathé opens its archives

    Through the screen

    British Pathé opens its archives
    The man behind the papier mâché mask

    Frank Sidebottom

    The man behind the papier mâché mask
    Chris Marker: Mystic film-maker with a Midas touch

    Mystic film-maker with a Midas touch

    Chris Marker retrospective is a revelation
    Boston runs again: Thousands take to the streets for marathon as city honours dead and injured of last year's bombing

    Boston runs again

    Thousands of runners take to the streets as city honours dead of last year
    40 years of fostering and still holding the babies (and with no plans to retire)

    40 years of fostering and holding the babies

    In their seventies and still working as specialist foster parents