Broker warns as Isa arrives

By DAILY MAIL REPORTER
Updated:

 

The individual savings account was dealt a fresh blow today as a leading independent financial adviser wrote to its 60,000 clients warning them strongly against rushing to buy the new investment products.

The mailshot from stockbroker and adviser Hargreaves Lansdown came as new research published today showed that ISAs are likely to be far less popular than the Government envisaged.

Only 6.5 million adults will buy an ISA this year, well short of original estimates of 15 million, according to a survey from Mintel. The new accounts will fail to attract non-savers, one of their prime purposes.

ISAs are the new tax-free investment vehicle which replaced personal equity plans and tax exempt special savings accounts on Tuesday.

In a letter to clients, Hargreaves Lansdown chairman Peter Hargreaves warned this week that they could be restricted from better deals later in the year if they rushed out to buy the first crop of mini-ISAs.

Investment groups likely to produce the best ISAs had not even announced their plans yet, he said. Some banks and building societies were selling the tax-free savings schemes with little to indicate they were mini-ISAs. Most providers had not yet produced Catmarked products, carrying low charges.

Mintel said about half of current Pep holders will take out an ISA in the first year, while 24% of Tessa holders that do not have a Pep will also take out an ISA.

The new products would attract 1.4 million savers who previously did not have a tax-free savings plan. But only 3% of non-savers will be attracted into saving because of ISAs, it said.

While more than £1 billion is estimated to have been put into Peps last weekend as investors rushed to beat the tax year deadline, ISA demand in the first few days is reported to have got off to a slower start.

Fund managers reported little interest, although some banks have done better. The Halifax said it had received 50,000 applications for cash-only ISAs.

Prices and pensions group Axa Sun Life accused the Government of producing "poorly targeted stakeholder pension proposals" as it reported a healthy 35% increase in new business to £149.1 million in the first quarter. That and the initial reluctance to acknowledge the need for advice could hit sales of new regular premium personal pensions, warned chief executive Les Owen.

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