Judge and Jury: Modest entrance for ISAs, while PEPs end their days with a bang - The Government needs to be more convincing if it wants savers to flock to ISAs, says Tony Langham, joint managing director, Lansons Communications

Last week, the start of the new tax year heralded one of the Government’s big ideas - the launch of ISAs (Individual Savings Accounts) to replace PEPs and TESSAs.

Last week, the start of the new tax year heralded one of the

Government’s big ideas - the launch of ISAs (Individual Savings

Accounts) to replace PEPs and TESSAs.



ISAs are a key part of the Government’s strategy to encourage more

people to save and thereby reduce reliance on the state. Changes to

pensions legislation and action to help cope with nursing home fees are

also in the pipeline.



From January the linked ’last chance to buy a PEP’ and ’what are ISAs?’

stories have dominated the personal finance media. This reached a

crescendo over the last three weekends of the tax year with the issue

regularly making news outside specialist pages and programmes.



The Government has virtually stayed away from direct involvement with

the media during this period. Even the Government’s own ISA (from

National Savings) was launched without ministerial support. This has

proved a wise move. Before 6 April new ISAs took a media backseat to old

PEPs as the closing down sale led to record sales. During its final week

the weight of PEP money being invested has helped power the stockmarket

to a record high.



Since 6 April ISAs have taken over and media coverage has gone as well

as the Government could have hoped. The specialist comment columns warn

against choosing too quickly, however the overriding impression to the

casual reader of any of the personal finance pages is that ISAs are here

and that anyone with money to invest should probably have one.



The Government has also, so far, largely avoided any flak from the

middle class for taking away its tax incentives. From next year the

maximum annual investment in an ISA is pounds 5,000 - compared to pounds

10,800 in PEPs and TESSAs combined. The Government’s Achilles heel on

ISAs is whether the big idea to replace PEPs and TESSAs actually

encourages any more people to save.



In the short-term it certainly won’t. The only way that more people will

switch existing savings into ISAs is if the Government does a lot to

make them feel comfortable about the decision - either by using the

media, or by advertising. Failing such a programme, the main impact of

the change will be a reduction of tax incentives to wealthier investors

and an increase in revenue to the Exchequer.



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