Royal Mail Shares and ISA Allowance Stolen ?

[TrueBlueTerrier]

How thousands who applied for Royal Mail shares have had their Isa allowance 'stolen' forever

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Angry investors who applied for shares in Royal Mail have had their annual tax-free Isa allowances stolen.

Vast numbers of the 700,000 who hoped to snap up shares in Royal Mail are thought to have had thousands of pounds stranded in Isa accounts.

Government rules mean it is impossible to move this money into an ordinary cash Isa account.

And many more have unwittingly used up much of their annual tax-free amount of £11,520 by withdrawing cash that was not used to buy shares.

Today, Money Mail calls on Chancellor George Osborne to end the baffling Isa rules and give Royal Mail savers their allowance back.

Some put up to £10,000 into their Isa when they applied for shares — but ended up with only £750 worth. Anyone who applied for more missed out completely.

If you wanted to buy Royal Mail shares and put them in an Isa, there was no option but to put the money into your account first.

This was then taken by brokers to apply for shares. Any money not used was then handed back after the allocation was announced.

There was no indication that the number of shares would be limited to just £750 worth for most ordinary investors. Now the remaining funds that were not used to buy shares are just languishing in people’s accounts.

Many are thought to have just withdrawn this cash — without realising that if they do so, their annual allowance is gone for good.

Justin Modray, the founder of Candid Financial Advice, says: ‘Small shareholders must be understandably fuming that they have been caught out by the Isa rules.



‘Many probably don’t even know the mistake they have made. There does seem to be a case for a special dispensation to help them.

'Otherwise private investors could once more lose out to the Government favouring the City while selling off Royal Mail on the cheap.’

Under the current rules you can put up to £11,520 in a stocks and shares Isa, of which half — £5,760 — can be in cash. Once you put money in, that counts as going towards your allowance, regardless of what you then take out.

Royal Mail investors left with spare money sitting in their shares Isa now face having to put it all at risk in other stock market investments they hadn’t planned on buying.

It also means that if they had not yet used their whole cash Isa allowance for the year, they may now not be able to because they can’t transfer money across.

They can leave the money sitting uninvested in the share Isa — but if they earn interest on this it won’t be tax-free.

A final option is to pull the money out, but they will lose some of their precious tax-free allowance.

For example, someone may have put £5,000 in an Isa to apply for Royal Mail shares.

This money was taken by their stockbroker, then given back once the allocations were announced. Assuming that the person then received only £750 worth of shares, £4,250 was returned to their Isa.

If they took this out, they would still have used up £5,000 of their annual allowance, but would only have £750 actually invested. Those who have had their Isa allowances stolen claim their brokers gave them no warning that withdrawing their funds would affect their annual tax-free limits.

Prohibitive regulations mean that you cannot move money from a stocks and shares Isa into a less risky cash one — even though it is possible to shift it the other way.


Money Mail’s Get Britain Saving campaign has called for one central Isa allowance, so savers have the freedom to move their savings between cash and investments.

As it stands, the rule is highly unfair on those nearing retirement who have to leave their nest-egg exposed to volatile stock markets. It also hits anyone putting aside money for a deposit on their first home.

Nearly 15  million people put money into Isa accounts last year and about 20 per cent of these — three million — invested in stocks and shares Isas.

Of the £57 billion pumped into Isas last year, £16.5 billion went into investment accounts.

While the average amount put into a cash Isa was £3,500 last year, £5,700 was put into stocks.

Anyone who put their money into a cash Isa in 2008 would have got on average a chunky 4.99 per cent, according to data firm Moneyfacts.

Putting the total £3,600 in a typical account would have become £4,592 with interest rolled up over five years.

Meanwhile, the UK stock market has been volatile, with the FTSE 100 dipping to around 3,500 in 2009 before a rocky ride up to its current high of around 6,700.

At such a high level and with a hike in interest rates possibly on the horizon, cautious savers keen to secure their profits could increasingly look to move to safer cash accounts.

Patrick Connolly, at advisory firm Chase de Vere, says: ‘It remains a disappointment that money cannot be switched the other way without losing existing Isa advantages.

‘There are many circumstances when people might need to move from stocks and shares to cash, maybe because of a change in their circumstances, their attitude to risk or if money might need to be accessed in the short-term.

‘People in the UK aren’t saving enough and so any affordable incentives which can help to change this should be encouraged; allowing investors to transfer stocks and shares Isas into cash Isas should be one such option.’

[mandelsons_toenail]

Meanwhile, somewhere in the uk, an old age pensioner is freezing to death in a bungalow worried about their bills

[wardroom]

Hope I am right here but I believe you can move your shares into an isa but it will have to be a stocks and shares one and the benefits are you can have dividends reinvested automatically (small fee) and ALS you have the tax free benefits.
For the long term this could be good as dividends reinvested can do very well, this is not advice just an observation.

[wardroom]

Hope I am right here but I believe you can move your shares into an isa but it will have to be a stocks and shares one and the benefits are you can have dividends reinvested automatically (small fee) and also you have the tax free benefits.
For the long term this could be good as dividends reinvested can do very well, this is not advice just an observation.

[ebbzie]

Meanwhile, somewhere in the uk, an old age pensioner is freezing to death in a bungalow worried about their bills

Well said

[heapsy]

Mmmm. I don't have a stocks and shares Isa, only a cash Isa. However, I do have a nominee share account. I bought shares through them, and bought through the EPO. I then transfered my shares from the EPO into my nominee account. For those not in the know, a nominee account works in much the same way. The only thing you have to be aware of is the Capital Gains Tax Limit. This is an annual allowance, curremtly £10,600 per year. (the amount you can make without paying tax) THIS is over and above your ISA limit. I chose this route as the costs are lower. There's even a way of lowering your dealing charges, if you know how. Dividends are reinvested without tax charges as the shares are held in a wrapper, similar to the ISA. It is a little known way of investing more than your ISA allownace. Yes, it does mean you have to be careful about how much you sell, but if you don't reach the limit then there is no tax to pay. Not many people would need that amount of money in one go. I'm using it as part of my pension plan and I'm doing very well. Self taught, you just need patience. Anybody want to know more please get in touch, I'll try and help if I can.

[Lounge Lizard]

Meanwhile, somewhere in the uk, an old age pensioner is freezing to death in a bungalow worried about their bills

Well said

Yes, pure greed.
It's always those that can most afford to lose a bit of money that go mad when they do. Bring back 80% higher rate income tax.

[midegarelu]

Meanwhile, somewhere in the uk, an old age pensioner is freezing to death in a bungalow worried about their bills