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Change to rules on tax-free ISAs Change to rules on tax-free ISAs
(about 15 hours later)
Changes to rules governing tax-free ISAs have been announced by the government, to allow more flexibility.Changes to rules governing tax-free ISAs have been announced by the government, to allow more flexibility.
Treasury Minister Ed Balls said people with cash accrued in ISAs from previous years would be able to transfer their money into stocks and shares ISAs. Treasury Minister Ed Balls said people with cash accrued in ISAs from previous years would now be able to transfer it into new stocks and shares ISAs.
In transferring the funds, savers would not affect their annual savings limit of £7,000, £4,000 of which can be placed in stocks and shares. But savers who did this would still be able to invest a further £7,000 a year in their ISA.
Mr Balls said he hoped to encourage savers to "diversify their assets". Mr Balls said he hoped to encourage savers to "diversify their assets" and to promote share ownership.
This is good news for savers who have built up sufficient precautionary savings in cash Richard Saunders, chief executive, Investment Management AssociationThis is good news for savers who have built up sufficient precautionary savings in cash Richard Saunders, chief executive, Investment Management Association
They could also "benefit from the potentially higher returns offered by stocks and shares over the long run". They could "benefit from the potentially higher returns offered by stocks and shares over the long run", he said.
The current ISA limits are £3,000 in cash and £4,000 in shares. The current ISA limits are £7,000 a year, of which up to £3,000 can be in cash.
Mr Balls said: "We will have just two components - cash ISAs and stocks and shares ISAs. This will simplify the regime and provide greater flexibility and choice for savers.Mr Balls said: "We will have just two components - cash ISAs and stocks and shares ISAs. This will simplify the regime and provide greater flexibility and choice for savers.
"We will continue to allow individuals to hold these components with either the same or different providers."We will continue to allow individuals to hold these components with either the same or different providers.
"And, as under the current regime, there will still be different investment limits for cash and stocks and shares within the £7,000 overall annual allowance.""And, as under the current regime, there will still be different investment limits for cash and stocks and shares within the £7,000 overall annual allowance."
'Most welcome''Most welcome'
The move follows an announcement earlier this month in which the government confirmed that ISAs were to be made permanent.The move follows an announcement earlier this month in which the government confirmed that ISAs were to be made permanent.
Initially launched for just 10 years, the tax-free savings policies will now stay in place indefinitely.Initially launched for just 10 years, the tax-free savings policies will now stay in place indefinitely.
One in three adults currently holds an ISA, and close to £215bn has been invested since their introduction seven years ago.One in three adults currently holds an ISA, and close to £215bn has been invested since their introduction seven years ago.
Richard Saunders, chief executive of the Investment Management Association, said: "Today's announcement that the government will allow investors to move savings currently held in cash ISAs into the stocks and shares component, without penalty, is most welcome.Richard Saunders, chief executive of the Investment Management Association, said: "Today's announcement that the government will allow investors to move savings currently held in cash ISAs into the stocks and shares component, without penalty, is most welcome.
"This is good news for savers who have built up sufficient precautionary savings in cash and who wish to access the potential returns of the stock market over the longer term.""This is good news for savers who have built up sufficient precautionary savings in cash and who wish to access the potential returns of the stock market over the longer term."
And Toby Hogbin, director of product management at Credit Suisse said: "We welcome the commitment to allow the transfer of cash ISA assets into a stocks and shares ISA portfolio.And Toby Hogbin, director of product management at Credit Suisse said: "We welcome the commitment to allow the transfer of cash ISA assets into a stocks and shares ISA portfolio.
"The ISA is a key pillar in personal saving and to allow transfer from cash to stocks and shares reflects recognition of the changing needs of the investor - flexibility in tax efficient savings solutions can only be of benefit to savers.""The ISA is a key pillar in personal saving and to allow transfer from cash to stocks and shares reflects recognition of the changing needs of the investor - flexibility in tax efficient savings solutions can only be of benefit to savers."