Individual Savings Accounts

Lord Lee of Trafford Excerpts

Monday 20th December 2010 Lords Chamber

Asked By

[Lord Lee of Trafford]

To ask Her Majesty’s Government why shares listed on the Alternative Investment Market are excluded from eligibility from individual savings accounts.

[Lord Lee of Trafford]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest as owning an ISA and a number of shares in AIM-quoted companies.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, individual savings accounts are the Government’s main non-pensions savings incentive and are held by 20 million adults. The Government believe that ISAs should be mainstream savings products and therefore do not intend to allow shares on the Alternative Investment Market, which can be riskier and less liquid, to be qualifying investments for ISAs. Companies listed on AIM may already benefit from other incentive schemes, such as the enterprise investment scheme and venture capital trusts.

[Lord Lee of Trafford]

My Lords, I thank my noble friend for his Answer but I find it very thin and disappointing. The arguments for allowing AIM shares to be eligible for ISAs are, frankly, overwhelming. They are supported by the Stock Exchange and the Quoted Companies Alliance. Eligibility would widen the shareholder base, improve liquidity and facilitate fundraising. It would also be tax neutral from the Treasury’s point of view. What is the logic in allowing AIM shares to be eligible for SIPPs but not for ISAs? I thought that the policy of this coalition Government was to encourage personal choice and indeed investment in our smaller growing companies.

[Lord Sassoon]

My Lords, I am sorry to disappoint my noble friend, who has been assiduous over the months in asking questions about AIM shares and ISAs. Within the range of products available, there are distinct differences between the aims of ISAs and those of other savings channels. When the ISA was introduced in 1999—and it has been an enormously successful investment channel—it was intended to be a mainstream product with easy access and liquidity. A line therefore has to be drawn between the sort of investments that are thought suitable to qualify and those that are not. AIM shares were kept out in 1999 and I believe that it is still appropriate, taking into account principally the nature of the product and the ease of access to liquidity investment, that they should be. SIPPs, which are a more sophisticated, tailored pension product with a different time horizon—for example, they do not require 30-day withdrawal—can rightly benefit from having a much wider range of investments held within them.