TaxPersonal Tax7 JUNE 2000 – SAVERS PUT RECORD £28BN INTO ISAs IN THEIR FIRST YEAR

7 JUNE 2000 - SAVERS PUT RECORD £28BN INTO ISAs IN THEIR FIRST YEAR

Individual Savings Accounts (ISAs) have got off to a flying start attracting over £28 billion, with over 9 million accounts opened in their first year, according to figures announced yesterday by the Economic Secretary to the Treasury, Melanie Johnson.

The figure of over £28 billion is around a third more than the sum put into PEPs and TESSAs in their last, and most popular year of operation of 1998-1999.

Following her announcement during a debate in the Standing Committee stage of the Finance Bill the Economic Secretary said:

“This superb set of figures – well on their way towards #30 billion – prove that ISAs are a great success story.

The take up of ISAs has been excellent throughout the year, but the amount put into ISAs during the last quarter from January to April was particularly good. At over £11 billion, it was far more than in any previous quarter.

We were confident that people would be attracted to the flexibility and choice that ISAs offer for tax free saving, and this has proved to be the case.”

DETAILS

1. The figures show :

nearly £28.4 billion paid into a total of over 9.3 million ISA accounts during the period from 6 April 1999 to 5 April 2000

over £13 billion paid into mini ISAs, including :

– over £11.5 billion into cash

– over £1.5 billion into stocks and shares

– £53 million into life insurance

over £15.2 billion paid into maxi ISAs, including :

– over £14.4 billion into the stocks and shares component

– over £760 million into the cash component

– nearly £15 million into the life insurance component.

2. In the comparable period of 6 April 1998 to 5 April 1999, £21.3 billion was invested in PEPs and TESSAs.

3. During the fourth quarter (6 January to 5 April 2000) some £11.1 billion was subscribed into ISAs. This compares to £7.2 billion subscribed in the first quarter, £5.5 billion in the second and #4.6 billion in the third quarter.

NOTES FOR EDITORS

The ISA Scheme

1. From 6 April 1999 individuals who are both resident and ordinarily resident in the UK for tax purposes and are aged 18 or over have been able to subscribe to an ISA.

2. Investments in ISAs are completely tax free and in addition will benefit from the payment of a 10 per cent tax credit for the first five years on dividends from UK equities. There is no lock-in and no minimum subscription to the ISA.

3. An ISA can include three components:

cash (including National Savings);
stocks and shares; and
life insurance.

4. Savers can subscribe up to £5,000 (£7,000 in 1999- 2000 and 2000-2001) in each tax year, of which no more than £1,000 (£3,000 in 1999-2000 and 2000-2001) may go into cash and £1,000 into life insurance. Husbands and wives have their own subscription limits.

5. Each year savers can either subscribe to one “maxi” ISA, which must offer a stocks and shares component and can have either or both of the other two components, or up to three “mini” ISAs, one for each component.

PEPs and TESSAs

6. PEPs held on 5 April 1999 continue under their current rules, but with no further subscriptions. They receive the same tax reliefs as the ISA. No TESSAs can be taken out after 5 April 1999, but existing TESSAs can run their course under their existing rules. On maturity savers can transfer the capital (but not the interest) to an ISA. The value of PEP and TESSA holdings, further subscriptions to TESSAs and transfers from TESSAs to ISAs does not affect entitlement to subscribe to the ISA.

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