Welcome to our very first interview, a series of many that will take place over the next couple of months with members of the Shepherds Friendly team. By talking to those who work for the Society, we can gain the benefit of their experiences and opinions on current topics. We will also be offering behind the scenes access to our head office and sharing what happens within the Society
Kim Harris, Managing Director of Shepherds Friendly, has kindly agreed to talk to us about the New ISA and what these recent changes mean to our members, or indeed anyone who is looking to open an ISA.
Good Morning Kim, let’s go back to the beginning, can you explain what an ISA is?
Hello and thank you for giving me the opportunity to talk about ISAs today.
ISA stands for ‘Individual Savings Account’ and it basically gives you the opportunity to make the most of your savings in a tax-efficient way. You can save within two different pots; either a Cash savings pot or a Stocks and Shares savings pot. They’ve been around since 1999 and are one of the most popular savings schemes in the UK.
And anyone can open an ISA?
Yes, pretty much; however you do need to be a resident of the UK. Anyone over the age of 16 can open a Cash ISA or if they are over the age of 18 they can also open a Stocks and Shares ISA. Don’t worry, for those under the age of 16 years their parents or a guardian can open a Junior ISA on their behalf, and can invest up to £4,000 a year.
This April the Chancellor, George Osborne, announced the introduction of the New ISA, which is great news for savers but many are still struggling to understand what the changes are. Let’s just take a couple of minutes to go through these changes, what they mean to our members or anyone who would like to transfer or open an ISA.
How is a New ISA different from a normal ISA?
Well, there are two main changes. The first change allows you to put more away each year, the new annual limit is £15,000, which has been increased quite a bit from £11,880. The second change is to do with flexibility, so you now have more control over how much you can invest in cash and how much you can invest in stocks and shares. Previously, you could only save up to half of your ISA annual allowance of £5,940 in a Cash ISA.
A new increased annual allowance of £15,000. That is good news. When did these changes take place?
Quite recently, in fact on the 1st July this year, so this is quite an important time for savers.
OK, so is there anything our members need to do now to benefit from these changes?
Well, it’s always important to save if you can and also to keep a close watch on those savings. If you already have a Shepherds Friendly ISA you don’t have to do anything, but you do need to be aware that the annual allowance has increased quite considerably, so it would be sensible to see if you can make use of that.
What about topping up your existing ISA? Can Shepherds Friendly members do this and how do they go about it?
At Shepherds Friendly nothing could be simpler; you can either visit our website, speak to our customer service team or talk to your financial adviser, if you have one.
And how easy is it to open an ISA if you haven’t got one?
It’s probably one of the easiest types of investment to open. At Shepherds Friendly we like to keep things simple, so you can open an ISA either via our website or over the phone, by speaking to a member of our customer support team. Alternatively there are other ways to open an ISA such as researching ISAs through a comparison website, speaking to your financial adviser or visiting your ISA provider, that’s if they have a local branch.
Some Cash ISA providers have updated their annual rates, which could mean consumers might want to shop around. Is there much paperwork involved when transferring your ISA from one provider to another?
That really depends on where you want to transfer from and to who. From 1st July the changes allow you to transfer between Cash ISAs and Stocks & Shares ISAs, as many times as you wish. I mentioned before about how we like to keep things simple at Shepherds Friendly when it comes to opening an ISA, and I think it’s pretty fair to say, even though we really don’t want our members to go elsewhere, we’ll make sure that transferring their ISA is a simple and painless process too.
So, if someone has already opened a Cash ISA with another provider and they find better rates elsewhere, can they open another Cash ISA?
One thing that hasn’t changed is the amount of Cash ISAs you can have in any one year, you’re only allowed one, so I’m afraid the answer there is no
I see, so they can transfer their ISA savings to another provider but they can only open one Cash ISA per tax-year. What about a Stocks and Shares ISA, could they open one of those as well as a Cash ISA?
Yes indeed, that’s still allowed, the important thing to remember is that you must not go over your ISA annual allowance of £15,000 each year.
So, as long as they don’t go over their annual ISA allowance of £15,000, they can have a Cash and a Stocks and Shares ISA, and they can transfer the funds between the two if they wish?
That’s exactly right.
How do you feel about the changes?
Personally I’m really pleased with them. We know that paying tax is important, but when you have the opportunity to legitimately save tax-efficiently, it makes sense to make the most of the opportunity as you can!
Do you see the changes having a positive impact on our members?
Yes I do. As I said earlier it’s important to save and also to keep an eye on those savings. With the new rules our members have an even greater opportunity to save tax-efficiently. That has to be good news!
And what about saving for children through a Junior ISA has that changed as well?
It’s changed a little. There is a new annual allowance of £4,000 which is up slightly from £3,840. The extra £160 may not sound a lot but even a small additional amount like this, when added year on year will make a difference in the long run.
What happens if our members can’t top up their annual allowance of £15,000, can they roll this over to the following tax year?
I’d like to say yes, but the allowance is only for that tax year, so on the 5th April each year the ‘clock resets’ so to speak, and you lose the bit you haven’t made use of. Obviously not everyone will be able to make use of their full allowance every year, as the new limit is quite a high one. That shouldn’t deter people though. If you can save, do, and if you can save tax-efficiently, better still!
So, just to summarise quickly …
- An ISA or a New ISA as it’s now known, offers you a fantastic way to save and it allows you to make the most of your savings, tax-efficiently
- You have the choice whether you invest your money into either a cash or a stocks and shares ISA or a combination of the two
- You have to be a resident of the UK to open one
- The annual limit increased on 1st July to £15,000 for an ISA and £4,000 for a Junior ISA
- If you already have an existing ISA it will automatically become a new ISA (NISA)
- To top up your ISA you’ll need to speak to your provider but you need to remember that you can’t go over the annual ISA allowance of £15,000
- You can have a cash and a stocks and shares ISA, and the new rules allow you to transfer your funds between the two. However you cannot open more than one of each type of ISA each year
- And finally, the ‘clock resets’ each tax year on 5th April, so if you don’t use your allowance within that tax year you will lose out
- “If you can save, do, and if you can save tax-efficiently, definitely do!”
That’s great, thanks Kim. We really appreciate your time and your observations, and I’m sure our members will find your tips on the New ISA really helpful.
Enjoy your week and we’ll catch up with you soon.