According to one industry publication, the Treasury has told an insurance company that the £1,000 limit on life insurance ISAs is about to change. However, when questioned, the Treasury confirmed talks were taking place but no firm plans had been made.
It is thought that the £1,000 limit could be raised to the Maxi ISA allowance of £7,000. This would mean that instead of having to take out a stocks and shares ISA if you wanted to invest the full £7,000 you would have a choice.
By offering a Maxi insurance ISA, investors would be able to invest in unit linked and with profits funds within the tax-efficiency of an ISA.
Our View
There are literally only a handful of companies that offer life insurance ISAs because the investment limit is so small. The cost of designing a product and making it profitable is therefore very difficult. However, if the limit was raised to the full £7,000 if investors wanted it, it could prove as a tax-efficient alternative to stocks and shares ISAs.