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New rules to help ISA investors hit by collapse of financial firm

Plans to enable investors to ‘top-up’ ISA savings lost in the collapse of a financial firm have been outlined by the Treasury.

Under the current rules, investments or cash lost due to the collapse of a provider or bank would still be treated as falling under the £10,680 annual allowance.

However, in a statement to MPs, the Financial Secretary to the Treasury, Mark Hoban, said the Government intends to change the ISA rules to permit investors affected by such a failure or default to make certain ISA investments over and above the normal subscription limits.

‘We intend that investors who have lost their cash ISA will be permitted to reinstate up to the balance of their account at the time of the firm’s failure in a new ISA, outside the normal subscription limits,’ he told MPs.

He added; ‘[The changes] will enable investors whose ISAs are affected by the failure or default of a financial firm to continue to benefit from tax-advantaged savings.’

The new regulations, which are expected to be finalised in spring 2012, formalise arrangements that were put in place following the collapse of several financial providers, including the Icelandic bank Icesave.

From April 2012 the annual amount that can be invested in a tax-free ISA is due to rise from £10,680 to £11,280, half of which can be saved in cash.