• Current system is overcomplicated, with over 40% of AIM investors unaware they couldn’t place AIM-traded stocks in ISAs unless dual listed
• Nearly a third of AIM investors do not currently hold a stock and shares ISA
• 36% of AIM investors want a change in policy to allow further investment in UK’s growing businesses
• The Share Centre calls for implementation before the summer recess

 Ahead of the closing of the Treasury’s consultation on 8 May, AIM investors have spoken overwhelmingly in support of changing legislation to allow AIM-traded stocks to be included in stocks and shares ISAs. The Share Centre’s latest research[i] also highlights making AIM investment more tax efficient would increase investor demand, benefiting growing businesses looking to raise funds.

94.2% of AIM investors polled by The Share Centre want the right to include AIM-traded stocks in stocks and shares ISAs.

The current method of investing in certain AIM stocks using an ISA is too complicated for many individual investors. Two in five (40.5%) AIM investors didn’t know that under current legislation AIM traded stocks were only available in an ISA if they were dual traded. As a result, not many have been able to take advantage of any tax efficiencies. Just 15.3% of those in support of changing the legislation already held dual traded AIM stocks in their ISA.

Simplifying ISA rules would benefit AIM investors, increasing demand

The tax benefit and simplification of allowing purely AIM-listed stock into ISA wrappers would attract more investment into the market. Currently nearly a third of AIM investors (31.3%) don’t hold a stocks and shares ISA – highlighting the potential for growth among current investors, let alone potential investors. In fact, respondents held an average of 32.3% of their portfolio in AIM stocks, equivalent to £11,562. Therefore the average AIM investor would be able fill their current annual stocks and shares ISA allowance completely with just their AIM stockholding if the regulations are changed.

Encouraging AIM investment would boost the economy

Changing the regulation will also support investment into small companies, helping the economy. 56% of companies listed on the alternative investment market are worth less than £25m, and the stock market plays a crucial role in small-scale companies raising finance given the lack of business lending.[ii]  For instance, nearly a quarter of AIM investors (23.2%) already invest the alternative investment market to help support the UK’s growing businesses. However, more than a third (36.1%) of investors want the change in legislation to encourage further investment of the UK’s growing businesses.

Gavin Oldham, Chief Executive of The Share Centre, comments:  “The announcement in the Budget to abolish stamp duty on AIM shares as from 2014 is a significant step forwards, but we believe the initiative to allow AIM shares into ISA portfolios can be implemented much sooner than the summer recess. AIM investment is a crucial growth engine for the economy. Allowing stocks and shares ISAs to include AIM investments would not just be popular; it would help small but growing UK companies raise the finance they need to play their part in the economic recovery.

“Changing the regulations would broaden investors’ choice if they want to invest tax efficiently in growing firms. To that end, we’ve written to more than 8,000 of our customers to notify them of the consultation, asking for them to send their views to the Treasury, and we hope the government will see sense under the weight of investors’ opinion and implement the initiative very quickly now.”

At Inheritance Tax Secrets we have long campaigned for more consideration to be given to the fact that ISAs are tax ineffecient when it comes to Inheritance Tax.  When a younger person dies unexpectedly, and has to pay 40% IHT on their ISA portfolio, that is bad luck.  But of they are 85 and in poor health and have just taken out an ISA…..

But IHT efficient investments for ISAs may be arrived soon, so keep in touch with your financial adviser.  If you don’t have one, we can put you in touch with one to review your at risk ISAs – we know lots of good ones through our work.

• ISA net sales through funds of £1.1 billion for tax year 2012/13
• Funds under management at a new peak of £718 billion
• Net retail sales of £787 million
• Mixed Asset was the best-selling asset class with net retail sales of £291 million
• Tracker funds saw outflow of £137 million from retail investors

Daniel Godfrey, IMA Chief Executive, said:

“The last minute rush into ISAs at the end of the tax year appeared again with £347 million invested in the first five days of April alone. This is a common trend, but investors should be reminded that they can invest in ISAs on a regular monthly basis. This not only reduces the financial burden of finding a lump sum but also reduces risk as you buy more units if prices fall, which then achieve higher proportionate gains when prices recover.

“Overall sales were lower in March compared to recent months. The sector rankings for the month both for ISAs and funds in general suggest that investors are spreading their money across different asset classes and that both growth and income strategies are in demand.”

FUNDS UNDER MANAGEMENT AND SALES

Funds under management continue to hit record levels at £718 billion in March 2013.  (See Table 2)

Net retail sales dropped to £787 million in March, significantly lower than the £1.4 billion last month and less than half the level of net retail sales this time last year of £1.5 billion.  (See Table 3 and Chart A)

Net sales to institutional investors were £391 million in March 2013.  (See Table 3)

ISAs*

ISA net sales through funds for tax year 2012/13 were £1.1 billion based on sales through fund companies and the five fund platforms that provide data to the IMA, compared to £2.2 billion in tax year 2011/12.

ISA funds under management for tax year 2012/13 were £121 billion based on data from fund companies and five fund platforms.

The first five days of April 2013 alone saw net retail sales of £347 million, higher than any monthly sales recorded in the last eleven months.

(See Table 10)

Based on sales between 1 April 2012 and 31 March 2013, the top-selling sectors for ISAs were:

ASSET CLASSES

Mixed Asset funds were the best-selling in March 2013 with net retail sales of £291 million – the first time this asset class has been the best-seller since July 2011 when it achieved net retail sales of £437 million.

Equity was the next best-selling asset class (excluding the Other category) with net retail sales of £105 million, the lowest since August 2012. Equity funds had previously been the best-selling for six consecutive months.

Money Market was the third best-selling asset class with net retail sales of £59 million in March 2013, the highest since May 2012 (£164 million).

Fixed Income funds saw net retail sales of £36 million, following two consecutive months of outflows in 2013.

(See Table 4 and Chart B)

Equity Fund Net Retail Sales by Region**

Global equity funds remain the best-sellers by far with net retail sales of £363 million in March 2013. This region has been the best-selling for equity funds since June 2012.

Asia was the second-best selling region for equity funds with net retail sales of £116 million, well above its 12 monthly average of £75 million.

European equity funds were the third best-sellers with net retail sales of £70 million in March 2013.

UK equity funds saw an outflow of £427 million, the highest since August 2012.

(See Table 4)

IMA SECTOR RANKINGS

The top five best-selling IMA sectors for March 2013 were:

1. Absolute Return UK with net retail sales of £334 million, the highest for the sector since December 2009. The sector was last recorded as the best-selling sector in September 2012 with net retail sales of £194 million.
2. Mixed Investment 20-60% Shares was the second best-selling sector with net retail sales of £245 million, the highest since July 2011 when sales reached £287 million.
3. Global Bonds was the third best-selling sector with net retail sales of £220 million, well above its monthly average over the last 12 months of £76 million and the highest net retail sales since November 2010 when they were £224 million.
4. Global Equity Income was the fourth best-selling sector with net retail sales of £150 million, the highest ever recorded since it was launched in January 2012.
5. Asia Pacific Excluding Japan was the fifth best-selling sector with net retail sales of £126 million.

The worst-selling sector for March 2013 was UK All Companies with an outflow in net retail sales of £499 million.

(See Tables 5, 6, 7)

RETAIL DISTRIBUTION

In March 2013, UK fund platforms saw the highest gross retail sales ever recorded at £5.4 billion, a 49% market share (46% in March 2012).

Gross retail sales for Other Intermediaries (includes Wealth Managers, Stockbrokers and IFAs) totalled £4.6 billion in March 2013, a market share of 41% (44% in March 2012).

Direct gross retail sales in March 2013 were £1.1 billion, the highest since April 2012 and representing a market share of 10% (9% in March 2012).

(See Table 8)

FUND PLATFORM PRODUCT SALES

For the five fund platforms that provide data to the IMA, funds under management for March 2013 were £144 billion, compared with £118 billion a year earlier. The five fund platforms are Cofunds, Fidelity, Hargreaves Lansdown, Skandia and Transact.

In terms of product sales via the same five platforms, ISA net sales were the highest at £378 million, followed by Unwrapped products (£225 million) and Personal Pensions (£163 million). Insurance Bonds saw an outflow of £27 million.

(See Table 9)

FUND OF FUNDS

Net retail sales for funds of funds in March 2013 were £170 million, £46 million of which was invested into funds run by the same asset management firm and £124 million was invested into funds managed by a different firm.

Funds under management for funds of funds continued to reach record levels in March 2013 at £79 billion, accounting for 11% of industry funds under management.

(See Table 11)

TRACKER FUNDS

Tracker funds saw an outflow of £137 million in net retail sales in March 2013 – the highest outflow since February 2006 (£150 million).

Funds under management for tracker funds reached £65 billion by the end of March 2013, the highest on record. Their overall share of total funds under management was 9%, compared with 7.6% as at the end of March 2011.

ETHICAL FUNDS

Net retail sales of ethical funds were £8 million in March 2013 – the first positive sales figure in 2013 for these funds.

Funds under management continued to reach record levels at £8 billion at the end of March 2013. Their share of total funds under management was 1.2%.

(See Table 12)

OVERSEAS DOMICILED FUNDS

Net retail sales for overseas domiciled funds in February 2013 were £374 million, the highest since September 2012.

(See Table 13)

-ENDS-

For further information, please contact:
Navdeep Sidhu, Press Officer, IMA – 020 7831 0898 or 07843 517618

Notes for Editors
Below is a full list of tables and charts accompanying the press release:

All tables

1. Summary table
2. Funds under management by asset class
3. Net sales
4. Net retail sales of funds by asset class
5. IMA sector rankings
6. Net retail sales by IMA sector
7. Best and worst selling IMA sectors
8. Retail sales by distribution channel
9. Five fund platforms – Funds under management and net sales by product
10. ISA Funds under management and net sales
11. Funds of Funds – funds under management and net retail sales
12. Tracker and Ethical funds – funds under management and net retail sales
13. Overseas domiciled funds – funds under management and net sales

Charts

1. Net retail sales
2. Net retail sales by asset classes

The IMA’s figures for fund sales cover retail and institutional sales for UK authorised unit trusts and open ended investment companies (OEICs). The figures do not include investment trusts and ETFs.

Each month small revisions to figures may have been made since the previous press release. This reflects additional information received by the IMA.

Net retail sales comprise money invested into funds less the money divested from funds.

* IMA’s ISA figures are based on information collected from fund companies and five fund platforms (Cofunds, Fidelity, Hargreaves Lansdown, Skandia and Transact) where they are the ISA provider. Fund business through other ISA providers such as wealth managers is not included. IMA’s figures cover about three-quarters of the whole of market for funds held in ISAs.

** Regional breakdown for equity funds

The following IMA sectors have been grouped together to compile the figures for regional equity sales:

Direct Channels

Direct includes sales forces and tied agents, private clients and other direct to investor sales without intermediation.

About the Investment Management Association (IMA):

• The IMA is the trade body for asset managers (retail and institutional) who manage £4.2 trillion of assets in the UK as at December 2011.
• Our purpose is to ensure investment managers are in the best possible position to:
  • Build people’s resilience to financial adversity
  • Help people achieve their financial aspirations
  • Enable people to maintain a decent standard of living as they grow older
  • Contribute to economic growth through the efficient allocation of capital
• The money our members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs.
• The UK is the second largest investment management centre in the world, after the US.
• We have recently launched a consumer website providing comprehensive information on investment funds.

• Up to 40% of life insurance payouts could be lost in tax – needlessly.
• Ex spouses could be set for unintended windfalls if paperwork out of date.

An urgent review of life insurance policies is being called for after figures from HM Revenue & Customs revealed bereaved families are being hit with Inheritance Tax (IHT) bills totalling up to £177 million.

Sean McCann, personal finance specialist at NFU Mutual, said: “This is completely unnecessary. Life insurance policies should, wherever possible, be written into a trust to prevent a significant chunk going to the taxman. Otherwise, up to 40 per cent of the payout could be claimed in Inheritance Tax.

“What’s more, trusts are really simple to set up and, with most life insurance companies providing the forms free of charge, it shouldn’t cost anything other than spending a little extra time to complete.

“To avoid paying tax unnecessarily, more people should take advice to reduce their effective tax rate. Up to 40 per cent of life insurance payouts could be lost in tax. Just a few more minutes could save up to £35,000 from the average inheritance tax bill, according to the latest figures.”

With more than 5,000 estates with life insurance policies being liable for IHT in 2009/10, there are likely to be many more cases where the policies are a tax problem waiting to happen.

Trusts are used with life insurance policies to help ensure that the payouts do not form part of an individual’s estate when they die, which can mean they are free of IHT. They can also allow the money to be paid out quickly without waiting for the estate to be settled.

Sean continued: “If you’ve taken the sensible step of insuring your life, you should also try to make sure any trust is still relevant to your personal situation.

“Often policies will have been written many years ago and there will be many people who will have remarried or changed relationships in that time but never reviewed their trust

“The thought of an ex-wife or ex-husband getting their hands on part of the inheritance often prompts people to review their situation sooner rather than later.

“We strongly recommend that anyone with life insurance cover take advice on setting up a trust so the taxman doesn’t take a slice of what’s intended for their loved ones.”

Life insurance trusts.

The Prime Minister has written to Herman Van Rompuy, President of the European Council, setting out the case for radical global action to tackle tax evasion and aggressive tax avoidance.

The letter, copied into leaders of all EU member states, sets out the PM’s ambition that the May European Council will inject the political will to tackle the problem and restore confidence in the fairness and effectiveness of our tax system, and calls for action in 4 key areas:

• a new global standard for multilateral information exchange
• action plans to increase transparency in beneficial ownership
• reform of global tax rules through the G20 and OECD, including where we could go further, eg greater country-by-country company reporting on the tax paid in their countries of operation
• improving the ability of developing countries to collect tax, building on the example of the government’s new joint unit

Battling tax evasion and avoidance is a priority for the G8 summit that the Prime Minister will host at Lough Erne in June.

The Prime Minister’s letter in full

24 April 2013

I welcome your proposal to discuss tax evasion and fraud at the May European Council. As you know, the loss of tax revenue resulting from tax evasion and aggressive avoidance is staggering. In a period of fiscal consolidation where hard-working citizens and businesses are being asked to bear extra burdens, we need coordinated, truly global action to address these issues. This is why I put tax transparency at the heart of the 2013 G8 agenda when I wrote to you and other G8 colleagues at the start of this year.

I welcome the initiative of the Commission’s recent Action Plan on Tax Fraud and Tax Evasion, which sets out a range of proposals on which Europe can show leadership. As part of this, we very much support implementing existing measures, including the proposal for amending the EU Savings Tax Directive – where we appear closer than ever to reaching agreement – and proposals for reviewing the full range of tools to tackle evasion and avoidance.

However, as the Commission’s Action Plan itself recognises, tax evasion and aggressive tax avoidance are global problems that require truly global solutions. Otherwise, tax evaders will simply play the system and arbitrage between one jurisdiction to another. There is now, ahead of the G8 Summit in June, a timely opportunity for the G8 and EU to inject the political will required to raise international efforts to a new level and take radical, rather than incremental, action in four areas.

Firstly, on tackling tax evasion, the introduction of the Foreign Account Tax Compliance Act by the US could move us rapidly to a new global system of multilateral automatic exchange of information. This covers a wide variety of products and entities – and critically, includes requirements, which the UK is implementing, to ensure that we can collectively tackle tax evasion through the use of offshore trusts.

The UK has also taken other concrete steps to clamp down on tax evasion. We recently concluded automatic information exchange agreements, based on our agreement with the US, with our Crown Dependencies – the Isle of Man, Guernsey and Jersey. We are also in advanced discussions with our Overseas Territories to do the same, and continue to work closely with them and the Crown Dependencies on further concrete steps they can now take to demonstrate their steadfast political and practical commitment to tackling tax evasion.

The recent announcement by the UK with France, Germany, Italy and Spain to pilot multilateral automatic information exchange based on our agreements with the US is a significant step. I am delighted that other European countries, including Poland, have already signalled their willingness to join this initiative. And to support the development of a universal standard, the UK has also asked the OECD to report ahead of the G8 Summit on how to deliver this effectively. I hope that at our May Council we can give the strongest possible message of support from Europe for the rapid adoption of multilateral automatic information exchange as a new global standard, and encourage other jurisdictions to publicly commit to joining a multilateral system at the earliest opportunity.

Second, we must break through the walls of corporate secrecy. A lack of knowledge about who ultimately controls, owns and profits from companies leads to aggressive tax avoidance, tax evasion and money laundering, undermining tax bases and fuelling corruption across the world. Therefore, the G8 and EU must work together to ensure full transparency in beneficial ownership.

This means ensuring full and maximum implementation of the existing Financial Action Task Force standards on transparency in beneficial ownership. I hope G8 Leaders will consider publishing national Action Plans by June that set out concrete steps that their governments will take to achieve this – including, for example, by enhancing the availability of beneficial ownership information through central public company registries. Europe now has a real opportunity to be in the vanguard through the 4th EU Anti-Money Laundering Directive. But as ever, we must work with other countries and financial centres to ensure a level playing field.

Third, I have always been clear that competitive national tax systems go hand in hand with individuals and corporates paying the taxes they owe. The majority of them do so, and make a valuable contribution to society and to the funding of our public services. But some are choosing to shift their profits artificially to ultra-low tax jurisdictions, distorting competition.

Again, we need a truly global solution. As I am sure you will agree, the path to reform starts with the basic recognition that current global tax rules do not reflect the modern and globalised economy that our citizens live and trade in. The UK will, with the rest of the G8, seek to provide high-level political support to the ongoing efforts in the OECD and G20 to identify problems and gaps in these existing rules, and to work up options for reform. And I hope that the European Council can strongly support these efforts, which will reach a critical juncture this summer.

But as part of these longer-term changes, there should be room for a serious debate about what further steps can be taken to address continued attempts at aggressive tax avoidance. For example, we should consider how the steps taken by some firms to undertake country-by-country reporting on the tax paid in their countries of operation can be further encouraged on a voluntary basis. This can hugely benefit tax authorities, especially those in developing countries that have limited capacity to collate this information themselves.

The final theme of the G8 tax agenda is ensuring developing countries can collect the taxes owed to them. The UK is setting up a new unit, joint between our tax authorities and the Department for International Development, to improve the capacity of developing countries to collect tax domestically, including a fair share from multinational companies. I hope all G8 and EU countries can make a similar commitment to prioritise their development assistance in this way.

Our recent success on the EU Accounting Directive will also enable developing countries to access information about payments made to their governments in the oil, gas and mining industries, improving the use of such revenues. To set an example to other countries that are considering similar legislation, I hope you will join me in urging EU partners to commit to early implementation of the Directive. And to complement company reporting, I hope that European countries can seriously consider – as the UK is actively doing – how to implement the Extractives Industry Transparency Initiative, which enhances governments’ own reporting of their extractive tax receipts.

The UK looks forward to continuing to work with all Member States and the European Commission on this hugely important agenda and to addressing these global issues with global solutions. I am confident that the upcoming European Council and the G8 Summit will be remembered as the turning point in the battle against tax evasion and avoidance and the restoration of confidence in the fairness and effectiveness of our tax systems.

I am copying this letter to the President of the European Commission and other members of the European Council.

The Venture Capital Trust (VCT) sector raised £402.5m in the 2012/13 tax year (value of new shares issued), according to figures published today by the Association of Investment Companies (AIC).

Excluding enhanced share buy backs, the VCT sector raised £269.2m in the 2012/13 tax year compared to £267.4m raised in the previous tax year.

Ian Sayers, Director General, Association of Investment Companies (AIC) said: “The level of funds raised is at its highest in seven years, reflecting strong investor demand for the sector.  This is a clear vote of confidence in the VCT structure and its role in financing UK smaller companies.”

Historic VCT fundraising figures

-Ends-

The research, assessing the knowledge of people with investable assets of at least £50,000, reveals that despite recent claims surrounding the implications of RDR and alleged low levels of awareness among consumers, the majority of serious investors are aware of the changes to how financial advice is delivered and paid for.

The high levels of awareness are being driven by advisers themselves. The research shows that investors who regularly consult with advisers have higher levels of awareness of the new regulations than those who invest without professional guidance. Around 85% of investors who consult with their financial adviser, every three months or six months were aware of the RDR regulations. This research highlights that advisers, who were tasked by government regulators with raising awareness of the regulations, have been successful in communicating the implications of RDR to their clients.

The research further reveals significant demand for professional financial guidance. Almost two thirds (62%) of serious investors intend to seek financial advice this year, however this figure rises to more than three quarters (76%) among younger investors, those aged 30-39.

James Rainbow, Head of Marketing UK, Schroders said:

“Despite previous reports, which suggest general awareness of RDR and its implications remains low among consumers, our research demonstrates wealthier investors are aware of the changes. However some of those with significant investable assets are still getting to grips with RDR and its implications.

“It is clear that advisers have done an excellent job explaining the changes – the majority of investors that use the services of a financial adviser have a better understanding of the impact RDR has on their investments.

“Our research also indicates there is growing demand for financial advice, with a large proportion of investors intending to seek professional guidance this year. Financial advice is a crucial aspect of helping people plan for their long-term financial futures, such as pensions and investments.”

RDR: our comment: that really doesn’t help the rest of the population – 95% or so!