- Handy as they are, Flexible Isas are still only offered by select providers
- We look at who does – and the rationale behind others not joining them
Flexible Isas were introduced in April 2016 as a way of giving savers the chance to make the most out of their allowance. The basic concept is the ability to move money in and out of an Isa without it counting towards your annual Isa allowance – as long as the money is replaced within the same tax year.
For example, imagine you had an Isa worth £100,000. You could withdraw half of it early on in the tax year and pay back in as much as you withdrew before the tax year ends – as well as that tax year’s Isa allowance. If your Isa is not flexible, you can only pay in the current tax year’s Isa allowance, irrespective of how much you take out. And this is only permissible for regular stocks and shares, cash and innovative finance Isas – you cannot have a flexible lifetime or junior Isa.
Certain life events can make this flexibility attractive, as I noted in a column last July after dozens of people wrote to me expressing their appetite for using one, or examples of when they have. One reader needed tens of thousands of pounds for building works that he expected to recoup, and another wanted to help her daughter with a deposit, for example.
But the problem is that the government didn’t make it mandatory for providers to offer flexible Isas. While the majority of the big banks (but not all) have made their cash Isas flexible, change among the big platforms has been lacklustre.
As you can see from the table below, most of the platforms cite lack of demand as a reason for not offering them. It may also be a commercial decision – why introduce a policy that by its nature could lead to lower fee revenue? Another argument could be that introducing a flexible Isa would be costly to implement. But if that’s the case then a charge could be applied to customers who use the facility to cover the expense.
Ultimately, anyone investing in shares or most funds should have a five-year time horizon or longer. But life happens and for some people a Flexible Isa can prove extremely useful – even if you don’t expect it to. If you think flexible Isas sound like a useful feature but your platform doesn’t offer them, write to its customer services team and let them know. If enough people do, it could move the dial on 'lack of demand'.
|Platform||Offers a Flexible Isa?||Reasoning|
|AJ Bell YouInvest||No|
We’ve found that there’s very low interest from our customers for flexible ISAs which is why we haven’t added the function to our accounts.
|Barclays Smart Investor||Yes|
|Charles Stanley Direct||Yes|
|Fidelity||No||We continuously review and assess demand amongst our customers for new products and services, and Flexible ISAs remain under consideration.|
We prioritise new products and features in line with our customers’ needs. While we're not offering a flexible ISA at present, we will continue to listen to our customers' feedback and, should we see an increase in demand, we would consider adding it in future. Regardless of the terms of their investment account, anyone considering investing should first ensure that they have cash set aside for unexpected expenses and they should feel comfortable locking up those funds for at least five years.
|Halifax Share Dealing||No||We have no current plans to provide a Flexible ISA.|
There are two main reasons why we don’t offer a flexible Isa. Client demand is very low, and a stocks and shares Isa is a long-term investment.
It’s widely understood that stocks and shares Isas, by their very nature, shouldn’t be treated as easy-access cash accounts. Investments should be held for the long-term and, broadly speaking, anyone who thinks they might need the money within the next five years should be holding cash rather than investments.
That said, we do understand that there are times when unforeseen circumstances may mean clients need to draw on their investments at short notice. If clients need to withdraw their money, they can do so easily and free of charge.
Potential developments to our service are prioritised based on a number of different factors, including client demand and need. Our assessment matches that of our clients and client need, at present, is low. For this reason, we have prioritised other developments to our service that will deliver greater benefit to a greater number of clients. We will continue to monitor client demand and need, and keep clients updated if there are any developments.
|iWeb||No||We have no current plans to provide a flexible Isa.|
We are always looking to innovate and are proud of our great value proposition. But we have no current plans to change our position on flexible Isas.
Flexible Isas might be useful in certain scenarios, for example as an alternative to a bridging loan. But this is not what the Isa regime was intended for – Isas are designed for investors who want to grow their wealth over the long-term. We want to keep our offering simple.
|iDealing||No||Did not respond to request for comment.|
|Trading 212||No||Did not respond to request for comment.|
|Source: IC and platforms|