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Nationwide decries complex ISA system

Around 12% of over-45s in the UK with a stocks and shares ISA have considered transferring these funds into a cash version, according to new research from Nationwide Building Society, even though they cannot do so under current ISA rules.

The survey highlights that the primary rationale behind this is the feeling that their money would be safer in a cash ISA. Around 31% admit that they want greater flexibility to manage their finances, which they believe a cash ISA can offer.

Of those who hold both types of ISA, 30% of over-45s hold more than 50% of their ISA savings in a stocks and shares ISA. Approximately 9% have also used up their full stocks and shares ISA allowance for the 2013-14 tax year. Unfortunately, as the rules currently stand, people only have two choices: either to leave the funds where they are, or to withdraw them and lose the ISA wrapper.

Nationwide’s chief executive, Graham Beale, said: “I would like the Chancellor to allow people to transfer out of stocks and shares ISAs and into cash ISAs. This would be particularly helpful for those older savers approaching retirement who have stocks and shares ISAs but want more flexibility about how they manage their capital and access their cash, especially those who prefer to de-risk their capital by putting it into cash savings rather than stocks and shares.

“Certainty of income and protecting capital is hugely important for older savers, particularly where it is a vital part of their retirement income. So, it is no surprise to see our research show that while one in five older savers have a stocks and shares ISA, more than half of them have thought about transferring to a cash ISA.”

He added: “At present, you can put twice as much money into a stocks and shares ISA than you can into a cash ISA, which clearly means people with stocks and shares ISAs have the potential to earn more tax-free interest than their cash ISA saving counterparts.

“This doesn’t seem fair to me, so in the run up to this week’s budget, I wrote to the Chancellor calling on him to increase the cash ISA limit so it is equal to the higher stocks and shares ISA limit.”

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