New ISA Rules

There are new rules for ISA investments that take place with effect from 1st July.

The investment funds that can be held in ISAs , Junior ISAs and Child Trust Funds are to be widened to include shares in peer to peer lending companies and also a wider range of investment trust choices, plus retail bonds issued by housing associations.

Currently, in order for shares in an investment trust to be eligible for ISA inclusion, no more than 50% of the trust’s investments by value can be held in securities that would not, if purchased on their own, qualify to be held by an ISA.

This means that the three investment trusts that invest in peer to peer lending :-

P2P Global Investments (P2P)

VPC Speciality Lending Investments (VSL)

Ranger Direct Lending (RDL)

are in theory not ISA eligible.

From July 1st however, these three trusts will be eligible for ISAs that hold investment trusts.

These can all be held in ISAs from July 1st.

This surely is a mouth-watering prospect for clients holding cash ISAs and getting slightly above zero return on their cash, and would suggest a stampede into stocks and shares ISAs to get their hands on the forecast yields of 8% plus.

For clients who hold stocks and shares ISAs, this must also be tempting as it provides for further diversification of assets.

However, before investing, take care as many of these types of investment trust trade at a premium to net asset value, thereby reducing the yield – so Ranger Direct Lending forecast yield of 10% is currently only 9.5%!

As always, take professional advice!!

for more information on investment trusts discounts and premiums (including a video) click the following link

Ray Best is a resilient Financial Planner with a unique approach to investment planning, his work ethic has propelled him from humble beginnings to be voted as a top UK Financial Planner by Vouched For (as published in the Sunday Times). These days he works with families with large investment portfolios or big inheritance tax liabilities, the first step, is to book a Discovery Meeting HERE.

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