I have had a somewhat fulfilling relationship with the individual savings account since this dear product was launched in April 1999 by then chancellor Gordon Brown. Journalistically, that is.
It has not always been a proverbial bed of roses – the relationship, that is. On occasion, I have given Isa a healthy dose of criticism for being too awkwardly complex. In response, its master, the government, has rebooted it and given the account a gentle makeover. A restriction lifted here and there. But on the whole, I am a big long-term admirer of Isa. It is not exactly a love affair but more of a special relationship.
Although I grew up with Personal Equity Plans and Tax-Exempt Special Savings Accounts (Peps and Tessas), there is no doubt that it is Isa that has revolutionised the personal savings and investments landscape. It has enabled us – man and boy, woman and girl – to build our own long-term portfolios free from the clutches of the taxman. No nasty capital gains tax on investment profits, no tax on income generated within, and withdrawals whenever we need them – to pay tax bills, complement our retirement finances or to help fund the purchase of a new car. Isas are our own mini-tax havens and we should cherish them. Thank you Gordon.
Indeed, despite being inferior to pensions in terms of their tax attractiveness, they have flourished over the past 19 years. Probably more as a result of the frequent government assaults on pensions than their own unique characteristics. All governments have tinkered with pensions since 1999, seldom to make them more consumer friendly (you can argue both ways on the issue of pension freedoms although auto-enrolment has been a force for good).
Assault on pensions
There have been crazy reductions in the lifetime, annual and money purchase allowances while most additional rate taxpayers have had to look elsewhere for tax-efficient, long-term savings in light of the reduction in their annual contribution allowance. Isas, yes, and also venture capital trusts and enterprise investment schemes. In contrast, the annual Isa contribution allowance is now a rather generous £20,000 – a maximum that few (certainly among my friends) are able to use.
Yet not everything is perfect in the world of Isa.
It is a point expertly argued by a working group that was formed last year by the Association of Accounting Technicians (I am not a member, I am glad to say) to see what can be done to give Isa a smart lean look in its 20s.
The group, comprising a mix of politicians, financial experts and journalists (not me but Laura Shannon, a colleague from The Mail on Sunday), has come up trumps. In its report, Time For Change: A Review Of The Isa Regime, it calls for a decluttering of the Isa mantlepiece. Get rid of all the baggage, it argues, and make Isas simpler.
Its main argument is that the Isa regime has become too complicated. Over the years, it says, chancellors have built a series of Isa extensions, not of all which have fitted comfortably within the Isa house or added to its overall value.