How does the new allowance work?
ISA’s come in many shapes and sizes; there are cash deposit based accounts or those that invest in a myriad of different assets including stocks and shares, corporate bonds, government debt and property.

You are currently free to invest up to £7200 pa across both ISA types which includes a maximum £3600 in cash but with the new annual subscription limit, over 50’s will soon be able to invest £5,100 in cash and up to £10,200 overall.

Clients need to be aware that you are allowed to open only one cash ISA and one stocks and shares ISA each tax year so if you haven’t already opened one then you can invest up to the new limit. If you have an existing ISA then you may need to take care not to disrupt your existing investment. Some cash ISA providers limit the amount that you can invest in your ISA in a given period of time and if you have already reached that limit then they may not now allow you to take advantage of the new allowance. Some institutions may also decide not to allow their investors the opportunity to benefit from the increased allowance at all but if either scenario applies to you all is not lost.

It is possible to transfer your ISA to another provider to take advantage of the increase, but it is vital that you do not simply close your existing ISA account to open another. Simply closing an existing account without formally transferring your balance in the old ISA will mean that the existing funds are looked on as new money and reinvestment will be counted against your allowance for this year.

This means that if, for example, you have built up a substantial savings pot in your exiting cash ISA of what could be as much as £30,000 and then close this account trying to re-invest in a new cash ISA, you will only be able to receive the tax benefits on £5100 of this money. Instead, you must transfer the balance using an ISA transfer form so that any pre-existing investment remains protected by the tax wrapper.

It is also important to check the terms and conditions that your ISA provider is offering on investment up to the new limit. It may be that a different rate or charges apply to investments over the existing limit of £7,200 and up to the new £10,200 limit and you should be especially wary of this if you have a fixed rate ISA.

How can I best take advantage of the increased allowance?
It’s all about risk versus reward. The cash ISA option carries less risk than a stocks and shares ISA but interest rates on deposits are currently low whilst equities have bounced back very strongly of late.

If you are tempted to invest in stocks and shares but you are put off by the risk then you could consider drip feeding money into your ISA to spread the risk. This is advisable for any form of investment but is especially useful for Stocks and Shares ISA savers as it allows you to minimise the effects of short term fluctuations in the stock market.

The advisers at RedegoFinancials can help you to maximise your investment potential by advising you on the best ISA for your needs. If you decide to opt for a stocks and shares ISA then our adviser will recommend a suitable spread of stocks and shares to suit your attitude to risk and they are on hand to help you transfer your ISA if your current provider won’t allow you to take advantage of the new limit.

Contractor Financials

Conservative plans to raise the state retirement age, up to ten years earlier than planned, will be outlined by shadow chancellor George Osborne later.

If the Tories win power they will set up a review to look at raising the pension age for men to 66 from 2016 at the earliest, to help tackle UK debts.

They have not discounted a rise in pension age for women towards 66 but have ruled out doing so by 2016.

Ministers plan to raise the pension age to 66 between 2024 and 2026.

‘Complexities’

Bringing the move forward would mean many more people than previously expected, particularly those aged between 49 and 59, having to work a year longer before qualifying for a state pension.

Conservative Party sources say the change would save £13bn a year from the budget deficit, about 0.75% of GDP each year.

Ministers intend to equalise the state pension age for women, so that it rises from 60 to 65 from 2010 to 2020.

Amid concerns women in their late 50s could have to work an extra three years if state pension ages are equalised at 66 in 2016, Tory leader David Cameron said that was “completely out of the question”.

He told the BBC that there were “complexities” in the plan and a new Conservative government would set up an independent review to look at how this could be taken forward.

The BBC’s political editor Nick Robinson said any suggestions that women in their late 50s would be left considerably worse off by the proposals would be politically dangerous and would be seized upon by opponents.

The rise in the pension age is designed to help pay for restoring the link between pensions and earnings which both Labour and the Conservatives are committed to introducing before the end of the next Parliament.

Mr Cameron said his plans were underpinned by “a genuine desire” to ensure pensioners were not “left behind” and were able to retire with “security and dignity”.

“The big step we are taking is to say that that the previous agreement that 2026 was the right year was not ambitious enough,” he told the Today programme, saying the debt crisis and rising life expectancy meant more urgent action was needed.

“We need to go further.”

Mr Osborne will announce the details of the pension plan in a speech to his party in Manchester later.

Under the government’s existing plans, the state pension age will rise gradually from 65 to 68 between 2024 to 2046.

‘Painful choices’

Senior Tory sources said the change was designed to lock in a sustainable and long-term saving into the public finances.

They acknowledged that the decision could prove unpopular with some but they said they were being deliberately upfront about a tough decision that would make credible savings in the long term.

Mr Cameron said some “painful choices” had to made to get to grips with the country’s debt crisis but that he was prepared to “take people through” these tough decisions now.

Mr Osborne is under pressure to demonstrate that he has a fully-worked out plan to deal with Britain’s record debts – and pay for some of the measures announced this week to deal with unemployment.

But his big speech looks in danger of being overshadowed by Chancellor Alistair Darling’s announcement of a pay freeze for 750,000 senior and middle-ranking civil servants, sparking Tory anger.

Mr Cameron criticised the announcement as being “slightly cynical in timing” and “quite insubstantial in content”.

“What you are going to see from George Osborne is quite a contrast, instead of not saying something to his party conference, which is what Labour have done, you will see George explaining to our party conference, what needs to be done.”

But Labour sources insisted they were not trying to scupper Mr Osborne’s speech, saying public sector pay was simply the first issue in Mr Darling’s in-tray after he returned from the Labour conference and a series of foreign engagements.

BBC Online

A change enabling millions of savers aged over 50 to increase the amount deposited in a tax-free Individual Savings Account (Isa) has come in.

The amount people can save in an Isa has now risen from £7,200 to £10,200, of which half can be saved in cash and half in stocks and shares.

The new limit, which was announced in this year’s Budget, is for anyone born on or before 5 April 1960.

For everyone else, the limit will rise from 6 April 2010.

“I am determined to help savers, because while low interest rates have helped millions of homeowners, I also know that they have hit those who rely on their savings to get by,” said Chancellor Alistair Darling.

Change

Isas were introduced 10 years ago by then-chancellor Gordon Brown in an attempt to encourage UK residents to get into the savings habit.

Now there are about 19 million Isa account holders in the UK, with five million using the full allowance each year.

Investors can open one cash Isa and one stocks and shares Isa each year and various providers are offering different options for those aged 50 and over to top up their existing Isas.

Some will allow a top-up to variable-rate Isas, but not to fixed-rate products. Others will allow fixed-rate top-ups because the change is considered an “exceptional circumstance”.

Other providers will allow people to open a parallel extra Isa, where they can save up to the extra £1,500 cash allowance, but the interest rate will be set at the level offered on the day – not the level offered earlier in the year.

“Isas have been around for several years now, and while they are widely understood, we believe some lingering perceptions remain that quite simply stop some investors taking advantage of the benefits that are theirs for the taking,” said Rob Fisher, head of personal investments at Fidelity International.

“The new rules coming into effect now, and the subsequent changes which are set to happen at the start of the new tax year, present investors with a bigger Isa opportunity than ever before.”

For more information on ISA’s and investments, please visit Redego Financials.

BBC Online

A judge has called time on the Government’s statutory retirement age of 65, ruling that in the current economic climate it was unlikely to be lawful.

Retirement age to change?

In a test challenge, Mr Justice Blake ruled that he did not see how 65 could stay as the default retirement age when the Government reviewed it next year — although it would still be lawful for employers to sack workers when they reached that age until the law was changed.

In a huge boost to campaigners who want the age scrapped, he said: “I cannot presently see how 65 could remain as a DRA after the review.”

His comments came in a ruling on a challenge to the retirement age brought by the charities Age Concern and Help the Aged, together with the Equality and Human Rights Commission.

The judge said that he recognised the “very substantial weight” of the arguments put forward by the charities. But he rejected their challenge on the basis that the Government was able to justify the retirement age when it was first introduced. However, conditions such as the state of the job market had now changed, he said. Charities immediately called on the Government to change the law in the light of the judge’s comments, saying that the Government had avoided defeat only because ministers had already caved in to pressure for a review next year.

John Wadham, legal group director of the equality commission, said: “The judge has sent out a strong signal that it is only a matter of time before the default retirement age of 65 is removed and we will consider what action we could take next.”

Age Concern and Help the Aged called on MPs to demonstrate their support for older workers by acting urgently to overturn the “unfair” and “outdated” legislation.

Andrew Harrop, head of public policy at Age Concern and Help the Aged, said: “Today’s ruling does not spell the end of our campaign to win justice for older workers. Ministers should amend the Equality Bill, which is currently making its way through Parliament.”

The Government argued that the EU directive on equal treatment in employment permitted member states to allow differences in treatment on age grounds if objectively and reasonably justified by a legitimate social policy aim.

The ruling clears the way for hundreds of tribunal claims to proceed.But David Green, head of the employment and pensions group Charles Russell, said that people with claims pending were likely to have them dismissed unless the ruling was overturned in the Court of Appeal.

He said: “This decision means that it is still lawful for employers to forcibly retire people at 65 provided they follow the correct statutory procedure.”

Times Online
29th September 2009