NISA to see you; to see you NISA

Martin Hales

The 1 July marked the introduction of New-ISAs (or NISAs) giving savers something of a Brucie-bonus.  We first heard about NISAs in George Osborne’s Budget speech back in March – a speech packed full of changes to savings and pensions.

So what has changed?  Since ISAs were introduced there have been two annual limits which increase each year.  The first was the total amount you are allowed to save in one tax year – up until 1 July that limit was £11,880.  The second limit was on how much of your ISA could be saved in cash (as opposed to stocks and shares), being half of the total limit, £5,940.

From 1 July all existing ISAs have become NISAs where the annual limit has increased to £15,000.  This is the only limit imposed; meaning that if you wanted to invest the full £15,000 in cash then you can do so.  As a result NISAs will be a much more flexible investment tool, offering savers the choice as to how much they want to invest in cash or stocks and shares (or both) each year within a tax free wrapper.

Many in the press have made the point that whilst the change to NISAs is a good move, it has sadly come at a time when interest rates are pretty low, and with some banks announcing savings rate cuts later this year.  The silver lining being that money retained in a NISA will remain tax free for life potentially taking advantage of higher savings interest rates in the future (we all hope!).

On the other hand, some of the more optimistic writers have made the point that a couple investing the maximum £15,000 each year, earning a decent return rate on the right mix of cash and stocks and shares, could be millionaires in around 25 years!

Together with the change to NISAs, the annual investment limit for Junior ISAs and Child Trust Funds has been increased to £4,000 per year.  These tax free investments are possibly under-used and can be a useful way of passing money down a generation or two.

It goes without saying that Larking Gowen do not provide financial advice and we would always recommend you speak with an Independent Financial Adviser about your options before making an investment.