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Fresh warning over UK ISA market
Some Individual Savings Accounts (ISAs) promoted on comparison websites could be in breach of guidelines set out by HM Revenue and Customs (HMRC), experts have warned.
It has been reported that products known as ‘kick-out plans’, which are sold on many of the UK’s major comparison sites, may be ineligible for equity ISAs because they can mature early in certain circumstances.
The Revenue is currently investigating the issue, but if the schemes are found to violate the rules then investors could lose their tax breaks.
Commenting, James Daley, editor of the consumer magazine Which? Money, said: ‘The vast majority of investments being offered on comparison sites are structured products, which often carry much greater risk than might at first be apparent.’
However, Matthew Hunter from comparison website Confused.com said: ‘Our aim is always to offer the most comprehensive service we can, but with stocks and shares ISAs we have sought to give consumers a good selection without claiming to cover the whole market.’
The warning comes just days after Consumer Focus appealed to the Office of Fair Trading (OFT) to investigate the ISA market.
In its super-complaint, the watchdog alleges that many banks and building societies are ‘baiting’ consumers with eye-catching short-term interest rates which than fall to uncompetitive levels after a year.
Consumer Focus estimates that around 15 million cash ISA holders could consequently be losing out in interest worth up to £3 billion a year.
With the average interest rate now 0.41%, the group has criticised the market for making it difficult for customers to switch providers and compare accounts.
It also called on the OFT to address the ‘lack of clarity’ and ‘confusion’ in the market, as well as the arbitrary rules imposed by cash ISA providers forbidding transfers into some of the most attractive accounts.