Chancellor Jeremy Hunt used the Spring Budget to announce the introduction of a new British Isa.
Today (6 March) Hunt unveiled that the British Isa will come in the form of an extra £5,000 tax-free allowance to encourage UK retail investment. The existing Isa allowance is £20,000.
Aegon pensions director Steven Cameron said: “The new British Isa will appeal to those who currently max out their Isa limits, providing scope for an extra £5k tax-free saving. It will also offer transparency, appealing to those who wish to be certain their investment is staying within the UK. It will be important the forthcoming consultation creates an unambiguous definition of what qualifies as a UK investment within a ‘British Isa’.”
Cameron did add a word of caution regarding the new Isa and added: “Investors should however be mindful about putting all their ‘eggs in one basket’.
“Diversifying across different asset types and geographical locations can be an important way of managing investment risk, something which should be emphasised to potential investors.”
However, he does feel that “the chancellor clearly wants to take every opportunity to use all types of savings and investments to boost UK economic growth.”
St. James’s Place divisional director of retirement and holistic planning Claire Trott took a similar line to Cameron and outlined both positive and negative outlooks on the British Isa.
Trott said: “We welcome all opportunities for tax free investment with the ‘British Isa’ increasing the overall Isa allowance. However, it comes with restrictions on where you can invest which may be a turn off for some. It also adds to the complexity of something that used to be simple, we now have multiple Isas with various restrictions, which will probably mean more need for financial advice.”
Quilter CEO Steven Levin echoed both Cameron and Trott by both welcoming the announcement but also warning that it must be implemented in a simple way.
Levin said: “We welcome the government’s consultation on the new British Isa, which aims to support UK-based companies and industries. This needs to be implemented in a simple way otherwise the complexity it could create for customers and Isa administrators would be greater than any value it generates. A British Isa should be set up as a separate product from the existing Stocks & Shares Isa and other types of Isas, with a £5,000 annual allowance and a limited range of eligible UK investments.
“While we are supportive any initiative that encourages tax efficient saving among the public, we are concerned that the British Isa may add confusion and complexity to the once-simple Isa-brand. Moreover, we doubt that the British Isa alone can address the fundamental issues that affect the UK stock market and economy, such as competitiveness, innovation, and regulation.”
As well as the British Isa launch, the chancellor said there would be a further consultation on Isa rules. Hunt had already spoken to 200 city representatives before announcing the British Isa.
Asset managers have responded positively to the plans, with both Liontrust and Unicorn Asset Management approving of the new Isa.
Isn’t the FTSE a proxy for international investment exposure, i.e. UK companies who earn their profits overseas? Perhaps, not so much since Brexit. Can’t wait to see what qualifies and what doesn’t and do we think that political sentiments (support the UK) are a sound basis for an individual’s investment strategy?
First question that comes to mind – Invest in the British ISA for an extra £5k, then switch out to somewhere else?
Just bear in mind that over the last decade the FTSE 100 has severely underperformed the French, German and even the Italian markets. One might ask is this a recipe for losing money?
Why not just extend the current ISA limit to £25,000 & just ask everyone to consider investing in the UK (as well as “green” investments)?