Providers to check before increasing ISA subscriptions
TISA – Tax Incentivised Savings Association – is advising members to obtain prior confirmation from customers who will benefit from the higher ISA subscription limit from 6 October before continuing or ‘re-starting’ direct debit payments.
In a Technical Bulletin to members, TISA says that discussions with the FSA have led it to understand that, in order to fully satisfy Treating Customers Fairly principles and comply with EU legislation, firms should not automatically continue to accept contributions or rely on opt-out clauses.
Instead, customers eligible for the higher ISA subscription limit available to those born on or before 5 April 1960 will be asked from October this year whether they wish to make additional contributions and to provide positive confirmation about increasing their direct debit payments.
Peter Shipp, TISA Technical Director (Savings Schemes) comments:
“The October increase in ISA subscription limits to £5,100 for Cash ISAs and £10,200 for Stocks & Shares ISAs for those aged 50 or above is an excellent benefit for savers. It does however raise a number of administrative questions and TISA is working on behalf of our members and the consumer to develop answers with HM Treasury and the regulator.”
“Some investors will have set up direct debit payments on the understanding that these will be stopped when the ISA subscription limit for the year is reached – currently £3,600 / £7,200. The question arises whether providers should assume that the investor wishes to make use of the new higher limit.
“In this case, even though the original contract might allow for contributions to be increased to the new limit, investors should make an informed decision about whether they make any extra subscriptions. Although some investors may feel inconvenienced by having to confirm their wishes before their ISA Manager can take further subscriptions, I believe this is the fairest solution and one which will meet the requirements of the FSA ‘Treating Customers Fairly’ approach as well as relevant EU legislation on unsolicited services.”
The new ISA subscription limits for those aged 50 or above on 6 October 2009 were announced in this year’s Budget. TISA has already obtained clarification that those whose 50th birthday falls before the end of the current tax year on 5 April 2010 will be able to benefit from the higher limit from 6 October 2009.
Ends
For further information, please contact:
Peter Shipp, Technical Director (Savings Schemes), TISA – Tel: 01642 666987. Email: peter.shipp@tisa.uk.com
Notes for Editors
The Tax Incentivised Savings Association (TISA)
TISA is the premier trade association in the UK retail savings and investment industry. By engaging with member firms, government, political parties, regulators and consumer groups TISA’s ultimate goal is always to further consumers’ best interests. It seeks to improve the range, features and quality of savings and investment schemes available whilst at the same time encouraging more people to save for their financial security and peace of mind.
Issued on behalf of TISA by Cauldron Consulting:
Steve Radford – Senior Consultant
Tel: 020 3178 7238
Mobile: 07889 903786
steve.radford@cauldron-consulting.com
Skype name: steveradford1
Cauldron Consulting Ltd
10 Fenchurch Avenue, London EC3M 5BN
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