Investing In ISAs: Top marks to the standard bearers

AN INDIVIDUAL Savings Account boasting a government CAT standard is supposed to be "straight forward, clear and fair and offer decent value". But despite the heavy publicity given to the voluntary standards, and the Government's stated desire to see companies competing to beat them and bring down the cost of saving, few ISA companies will be using them.

Some have products that would qualify or be able to qualify with a little tweaking but are in effect boycotting the scheme. Firms not offering CATmarked ISAs say that, far from improving clarity in the crowded savings market - which is another government aim - CATmarks will confuse people into thinking they are a performance guarantee.

They also complain that the tough criteria the standards lay down means they can be used only on a very narrow range of products. To qualify for a CATmark an ISA has to match or better criteria laid down by the Government on charges, access to funds and terms it offers.

The Treasury argues the standards are "challenging but sustainable". CAT standard stocks and shares ISAs can charge no more than 1 per cent per year of the amount of money invested, and have a minimum investment of no more than pounds 500 for a lump sum or pounds 50 per month.

Cash ISAs can levy no charges other than for replacements such as lost cards, allow withdrawals in no less than seven days and have a minimum investment of no more than pounds 10. They must pay interest of no less than two percentage points below Bank of England base rates and raise rates within a month of the Bank doing so.

Abbey National is launching a CAT standard ISA paying 6 per cent on deposits from pounds 1, rising to 6.5 per cent on pounds 3,000. But the bank says that while it is offering an insurance-linked ISA, this will not be CATmarked.

CAT standard insurance ISAs can charge no more than 3 per cent a year, have minimum premiums of no more than pounds 250 for a lump sum or pounds 25 a month, and have surrender values after three years that must at least return the value of what has been paid in.

The Research Department, a financial research firm, has analysed over 128 "mini" ISAs, which offer just one of the three components that can make up an ISA, and 106 "maxi" offerings, which must provide the stocks and shares element and can add a cash or life insurance or both.

It found just 12 out of 86 stocks and shares mini ISAs offered a CAT standard option, none of six insurance mini ISAs offered CAT standards, and just 39 of 83 cash mini ISAs, offered CAT standard options.

As for Maxi ISAs, just 13 of 106 with the compulsory stocks and shares element boast a CAT standard, while none of six with a life insurance element, and only 15 of 43 with a cash element, have them.

Of those CATmarked stocks and shares ISAs on the market, nearly all will be so-called index trackers, which aim to "track" the performance of a recognised stock market index, such as the FTSE 100.

Norwich Union and Standard Life, however, will be offering "actively managed" funds with CATmarks, which aim to beat either a stock market index or an industry performance benchmark.

But many firms wanting to offer stocks and shares CATmarked products have been forced to cut charges.

Virgin Direct had to drop the pounds 2 fee for monthly contributions into its index-tracking PEP from its index tracking ISA replacement. Legal & General also ditched monthly fees on three CATmark qualifying funds, Norwich Union had to remove initial charges from its three qualifying actively managed funds, and Standard Life had to cut the annual management fee on its actively managed CATmark fund from 1.5 to 1 per cent.

Gordon Maw, Virgin Direct's marketing manager, says the company believes CATmarked ISAs will attract enough savers to make them pay. He says: "We have got through the difficult period and now it looks like CATmarks are established as an important part of the ISA."

Gartmore is one company that could easily offer a stocks and shares ISA with a CATmark but refuses to do so. A spokeswoman says: "Although we agree with improving clarity we think customers will see CATmarks as some kind of guarantee.

"We think CATmarks are encouraging people to go in without explaining the dangers, they are all right for cash ISAs but not stocks and shares."

Other big-name fund managers such as Jupiter, Perpetual, and Schroders, which do significant business with independent financial advisers, have also decided to snub the CATmark scheme.

But Neil Liversidge, investment adviser at DBS, an independent financial advice network, says: "I think more will come on the market as more companies look to sell direct to the public rather than through independent advisers."

PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Luis Suarez looks towards the crowd during the 2-1 victory over England
sport
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
News
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sport
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Sport
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
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.

iJobs Job Widget
iJobs Money & Business

Trade Desk Specialist (Linux, Windows, FIX, Finance, Networks)

£60000 per annum: Harrington Starr: Trade Desk Specialist (Linux, Windows, FIX...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Project Manager - ETRM/CTRM

£70000 - £90000 per annum + Job Satisfaction: Harrington Starr: Project Manage...

C#.NET Developer

£300 - £350 per day: Harrington Starr: C#.NET Developer C#, WPF,BLL,MVVM, SOA...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform