Autumn Statement: Retail bond Isa eligibility scope may be widened

Funds and Investment Trusts December 5, 2013 by Holly Black

The Autumn Statement has revealed that the eligibility rules for retail bonds in Individual Savings Accounts (Isas) may be widened. 

The Statement has detailed that ‘the government is exploring whether to increase the number of retail bonds eligible for stocks and shares Isas by reducing the requirement that such securities must have a remaining maturity above five years’.

Currently retail bonds must have at least five years left on their duration to be able to be included in an Isa, possibly to encourage longer-term investment. 

Mark Glowery, head of retail bond sales at Canaccord Genuity, thinks the move would be good news. ‘Widening the scope of Isa-eligible retail bonds will be welcomed by investors. UK companies have made good use of the growing retail bond market for their funding, and such a move would also increase their options and help them further diversify their funding,’ he says.

Rebecca O’Keeffe, head of investments at Interactive Investor, says: ‘Bonds and Isas are natural bedfellows, with gross coupons being most tax effective in an Isa. Removing the five-year-plus maturity restriction would be great news for investors and increase the range of options available.’

However, she warns that investors should still be aware that retail bonds are not covered by the Financial Services Compensation Scheme (FSCS).

Prior to the Autumn Statement there had been talk of peer-to-peer lending being made eligible for Isa inclusion, but no mention of this was made by the Chancellor on Thursday.

It has also been confirmed that Isa allowances will rise in line with the consumer price index (CPI) inflation rate from April 2014. The new allowance for Isas will be £11,880 (half of which can be invested into a cash Isa), and £3,840 for Junior Isas.

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