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11 Dec 2013

UK Government Proposes To Include Retail Bonds In ISAs

Chancellor George Osborne suggested in his Autumn Statement that investors might be allowed to include retail bonds in their individual savings accounts (ISAs). The change was proposed to reflect the increased popularity of retail bonds among investors, the Daily Telegraph reported.

If the proposal gets approved, retail bonds that have maturities of less than five years will be allowed in stocks and shares ISAs, the Chancellor announced. At present, retail bonds are only eligible for ISAs if they have more than five years left of their duration, so as to encourage long-term investments. Apparently, the government wants to widen the scope of possible investments, but the Daily Telegraph informs that under the proposal, only bonds listed on the London Stock Exchange will be eligible. Other types of retail bonds, known as loyalty bonds, will remain out of ISAs.

A statement released by the government said that it will be looking into whether to increase the amount of retail bonds that are eligible for stocks and shares ISAs by reducing securities related to the maturity of the bonds.

In the past few years, investors have been trying to diversify their portfolios in hopes to yield better returns. Retail bonds have become a preferred option for many Britons, which led to a number of large companies issuing their own retail bonds, including Tesco Personal Finance, National Grid and Provident Financial.

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