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; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Suggested Topics
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

    Recruitment Genius: Sales Assistant / Buyer

    £15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    Day In a Page

    Greece says 'No': A night of huge celebrations in Athens as voters decisively back Tsipras and his anti-austerity stance in historic referendum

    Greece referendum

    Greeks say 'No' to austerity and plunge Europe into crisis
    Ten years after the 7/7 terror attacks, is Britain an altered state?

    7/7 bombings anniversary

    Ten years after the terror attacks, is Britain an altered state?
    Beautiful evening dresses are some of the loveliest Donatella has created

    Versace haute couture review

    Beautiful evening dresses are some of the loveliest Donatella has ever created
    No hope and no jobs, so Gaza's young risk their lives, climb the fence and run for it

    No hope and no jobs in Gaza

    So the young risk their lives and run for it
    Fashion apps: Retailers roll together shopping and social networking for mobile customers

    Fashion apps

    Retailers roll together shopping and social networking for mobile customers
    The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

    Gaping hole at the heart of the European Union

    Treatment of Greece has shown up a lack of genuine legitimacy
    Number of young homeless in Britain 'more than three times the official figures'

    'Everything changed when I went to the hostel'

    Number of young homeless people in Britain is 'more than three times the official figures'
    Compton Cricket Club

    Compton Cricket Club

    Portraits of LA cricketers from notorious suburb to be displayed in London
    London now the global money-laundering centre for the drug trade, says crime expert

    Wlecome to London, drug money-laundering centre for the world

    'Mexico is its heart and London is its head'
    The Buddhist temple minutes from Centre Court that helps a winner keep on winning

    The Buddhist temple minutes from Centre Court

    It helps a winner keep on winning
    Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

    Is this the future of flying?

    Battery-powered planes made of plastic, and without flight decks
    Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

    Isis are barbarians

    but the Caliphate is an ancient Muslim ideal
    The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

    Curse of Brink's Mat strikes again

    Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
    Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

    'The ministers talk to us about miracles'

    Why Greeks are cynical ahead of the bailout referendum
    Call of the wild: How science is learning to decode the way animals communicate

    Call of the wild

    How science is learning to decode the way animals communicate