§ Mr. LoughtonTo ask the Chancellor of the Exchequer (1) what regulations will apply to new retailers of financial products in respect of the ISA schemes with particular reference to supermarkets; what additional compliance costs will be involved; and who will bear these costs; [21352]
(2) what proposals he has to institute a "cooling off' period for those taking up new ISAs. [21337]
§ Mrs. Liddell[holding answer 17 December 1997]: The regulatory authorities will make proposals on these matters once the form of the ISA has been decided.
§ Mr. GibbTo ask the Chancellor of the Exchequer (1) on what basis he calculated his estimate of the number of people with PEP and TESSA investments in excess of £50,000; [19766]
(2) what estimate his Department had of the number of people with PEP and TESSA investments with a combined value of more than £50,000 when they announced their proposal for individual savings accounts. [19765]
§ Mr. Malcolm BruceTo ask the Chancellor of the Exchequer what is his current estimate of the total number of individuals who presently hold personal equity plans and tax exempt special savings accounts who will be affected by the new £50,000 limit on individual savings accounts; what margin of error is involved in this estimate; and if he will make a statement. [20398]
§ Dawn Primarolo[holding answer 15 December 1997]: The estimate of between 300,000 and 500,000 people with PEP and TESSA investments in excess of £50,000 by April 1999 is based on an interpretation of survey data and information supplied by some major PEP providers. The estimate is necessarily tentative as TESSA and PEP investors are not required to supply the Inland Revenue with any information about their investments, and individual providers would not have information on investments made by their clients with other providers.
§ Mr. GibbTo ask the Chancellor of the Exchequer (1) what assessment he has made of the effect on the housing market of the abolition of PEPs and the introduction of individual savings accounts with a maximum holding of £50,000, with particular reference to PEP mortgages; [19767]
(2) what estimate he has made of the number of people who hold PEP mortgages in excess of £50,000. [19768]
§ Mr. Geoffrey RobinsonDiscussions with major mortgage providers suggest that by April 1999 the vast majority of PEPs used for mortgage purposes would be worth less than £20,000. One major provider of PEP mortgages has stated that £50,000 of equity-linked savings within an ISA over a 25 year period should be sufficient to fund a mortgage of some £125,000. Couples will therefore be able to benefit from an ISA each to cover repayment of a mortgage of up to £250,000. Any effect on the housing market is expected to be negligible.
§ Mr. GibbTo ask the Chancellor of the Exchequer on the basis of what market research he estimated that there would be six million new individual savings account savers. [19770]
473W
§ Mr. Geoffrey RobinsonIt is hoped that six million people may open new individual savings accounts. This represents the expected number of accounts which could be opened within about three years of their introduction by those who currently do not have a PEP or TESSA. This estimate takes account of an analysis of people with interest from bank and building society accounts which is subject to income tax (i.e. interest on savings held outside of TESSAs) from the Inland Revenue Survey of Personal Incomes.
§ Mr. LilleyTo ask the Chancellor of the Exchequer what estimate he has made of the amount of extra tax revenue to be raised in each of the first three years after implementing the plans outlined in his consultative document about individual savings accounts. [19705]
§ Mr. Geoffrey Robinson[holding answer 8 December 1997]: The costs of introducing individual savings accounts as set out in the consultative document and are expected to be broadly similar in the first three years to the estimated cost of PEPs and TESSAs, if these schemes were to continue with their current tax reliefs.
§ Mr. LilleyTo ask the Chancellor of the Exchequer what estimate he has made of the relative average costs of the administration of(a) PEPs, (b) TESSAs and (c) ISAs by their providers. [19675]
§ Mr. Geoffrey Robinson[holding answer 8 December 1997]: In designing the Individual Savings Account we have sought to replicate so are as possible existing PEP and TESSA procedures, and we intend to keep costs to ISA providers as small as possible.
§ Mr. Malcolm BruceTo ask the Chancellor of the Exchequer what are his estimates of the net revenue yield to the Treasury for each of the years(a) 1998–99, (b) 1999–000, (c) 2000–01, (d) 2001–02 and (e) 2002–03 of the proposals contained in his recent consultative paper in relation to the introduction of the individual saving account and the associated restrictions relating to the monetary value of personal equity plans and tax exempt special savings accounts which can be transferred into the ISA; and if he will make a statement. [19755]
§ Mr. Geoffrey Robinson[holding answer 10 December 1997]: The costs of introducing individual savings accounts as set out in the consultative document and are expected to be broadly similar in the first three years to the estimated cost of PEPs and TESSAs, if these schemes were to continue with their current tax reliefs. There may be a small effect for 1998–99 if the proposals encourage people to open TESSAs, or some PEP savers whose savings exceed the overall limit of £50,000 choose not to subscribe additional funds.
§ Mr. Malcolm BruceTo ask the Chancellor of the Exchequer what is the policy of the Government in relation to the integration of tax relief on individual savings accounts with that on the proposed stakeholder pensions; and if he will make a statement. [19954]
§ Mr. Geoffrey Robinson[holding answer 10 December 1997]: The individual savings account (ISA) and the stakeholder pension are intended to be different but complementary products. The stakeholder pension involves a commitment to lock money away until retirement, while the ISA gives investors greater access to their money.
474W
§ Mr. LoughtonTo ask the Chancellor of the Exchequer what would be the estimated loss of tax relief to the Treasury if all PEP investors were to make the full contributions currently permissible into private pension plans. [21350]
§ Mr. Geoffrey RobinsonThis information is not available. The estimated cost would depend on the individual circumstances of each PEP investor, and information on the pension provision of PEP holders is not available centrally. Many PEP investors will not be in a position to secure tax relief for contributions as they may be retired or at their contribution limit, and others will be saving for purposes other than retirement income and would wish to have access to their funds.
§ Mr. LoughtonTo ask the Chancellor of the Exchequer what estimate he has made of the current average value of PEP plans into which the full maximum annual instalments have been made since inception. [21349]
§ Mr. Geoffrey RobinsonAssuming annual growth in line with the Financial Times Actuaries All-Share Index. the current value of the maximum subscription of £82,200 by 1997–98 is estimated at around £150,000, before allowing for the effects of charges and reinvestment of dividends.
§ Mr. LoughtonTo ask the Chancellor of the Exchequer what factors underlay his decision to hold a monthly prize draw for holders of ISAs. [21507]
§ Mr. Geoffrey RobinsonA priority for the new individual savings account (ISA) is to increase the attraction of tax free saving to many of those who do not save at the moment. The proposed prize draw is intended to offer people an additional incentive to save through the ISA.
§ Mr. LoughtonTo ask the Chancellor of the Exchequer if he will make a statement on the importance of marketing in support of ISAs. [21506]
§ Mr. Geoffrey RobinsonMarketing by individual savings account (ISA) providers will clearly be important in encouraging take-up of ISAs, as it is at present with PEPs and TESSAs. The ISA proposals are intended to encourage a diversity of providers such as existing PEP providers, banks and building societies, insurers and friendly societies and retailers such as supermarkets.
§ Mr. LoughtonTo ask the Chancellor of the Exchequer what estimates he has made of the net income to individuals on equity investments up to the maximum permissible annual limit proposed in ISAs based on a current average FT Allshare index yield; and what would be the full taxable amount saved by basic rate saver taking up such a scheme. [21338]
§ Mr. Geoffrey Robinson[holding answer 17 December 1997]: Assuming the current gross dividend yield of around 3.2 per cent., an individual savings account would provide an annual income of £142 in the first year for every £5,000 invested in UK equities, of which £128 would be paid as net dividends, and £14 as a 10 per cent. tax credit. In addition capital gains will be tax exempt.
§ Mr. LoughtonTo ask the Chancellor of the Exchequer what is his estimate of the number of people likely to have more than £50,000 in PEPs and TESSAs on(a) 1 April and (b) 1 October 1999. [21336]
475W
§ Mr. Geoffrey Robinson[holding answer 17 December 1997]: It is estimated that between 300,000 and 500,000 people may have PEP and TESSA investments in excess of £50,000 by April 1999. This estimate is based on an interpretation of survey data and information supplied by some major PEP providers. The number at 1 October will depend on the pattern of transfers into individual savings accounts.
§ Mr. LoughtonTo ask the Chancellor of the Exchequer for what reasons direct gilt holdings are not to be qualifying investments under the ISA proposals. [21353]
§ Mr. Geoffrey Robinson[holding answer 17 December 1997]: Under present proposals gilt-edged securities could qualify for inclusion in an individual savings account (ISA) as part of the investments of a UK authorised unit or investment trust or open ended investment company (OEIC). If direct holdings of gilts were eligible they would fall most naturally into the cash component of the ISA. But it must be recognised that gilts are not really designed for small purchases of up to £1,000 a year (the contribution limit for the cash component).