New ISA NISA Warning

New ISA NISA Warning on Investor Protection.

Yesterday saw the launch of the New ISA (NISA), the simplified individual savings account.

• Adult ISA Limit increased to £15,000 pa
• Junior ISA Limited increased to £4,000 pa.
• The same tax benefits apply.
• You have no need to worry about mini Cash ISA or mini Stock ISA limits, you can switch between the two holdings in whatever proportion you want.
• You can move all to cash or to stocks and shares as you see fit.
• You can transfer from one ISA provider to another.

We have already covered in a previous story about the downside of ISAs:

• NISAs form part of your estate for inheritance tax planning.
• NISAs cannot be placed in trust for further tax planning.
• NISA capital is included as individual capital in any care fees means test under the Charges for Residential Accommodation Guide (CRAG)

This set us thinking about investor protection.

Cash Investments such as bank and building society accounts and cash ISAs have an individual financial services compensation scheme protection limit of £85,000

• Stock Investments via investment firms such as unit trusts, investment trusts and stock ISAs have an individual financial services compensation scheme protection limit of £50,000
• Many people already have more than £50,000 in ISAs with one firm.
• With the ability to swicth between the two elements or indeed have a cash holding ISA in an Investment firm - what is the protection?
• What if you have £85,000 in cash in an investment firms ISA?
• We have completed some investigation and we believe this has not been truly addressed yet by the Financial Conduct Authority or investments firms.

Holding "cash" for a client means you must be authorised by the FCA to "hold client money" - banks have this, some investment firms have this but many do not.

The FCA has suggested that the new ISA (NISA) rules mean that offering ISAs now fall within holding client money rules and we suggest this is what you should look for if you have or plan to switch huge sums of cash based ISA holdings into cash.

As ever, contact us for advice on the New ISA NISA and investor protection.