Danny Cox, head of Financial Planning at Hargreaves.
A new form of Isa encouraging people to set aside money for nursing care should be created, Hargreaves Lansdown has proposed.
The idea is part of a five point plan to boost the number of people investing in an Isa account.
Although there are over 24 million Isa holders – about half of the adult population - new rules would encourage more to save and invest, according to Danny Cox, head of Financial Planning at Hargreaves.
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With the Budget coming on March 19, he wants to see the introduction of a long term care Isa, which can only be drawn upon in the event of needing nursing care but would be passed onto beneficiaries inheritance tax free if not required.
He said this would fill a gap because savers and investors currently lack dedicated products to protect themselves against the costs of long term care.
Mr Cox said: "A long term care Isa would encourage people to set aside money for nursing care in the knowledge that if they did not require care their savings would not be lost.
"This could also be funded by a separate additional Isa contribution allowance and savers could be able to roll over tax-free cash sums from pensions into it. The cost to the Government in additional tax relief should be more than offset by higher personal provision, thereby relieving some of the burden on the state."
His four other proposals are:
• Scrap current rules on investments losing Isa status when account holder dies to allow spouse to inherit without losing tax benefits.
• Allow the transfer of insurance investment bonds to Isas and pensions – without incurring a tax charge.
• Tax-free cash and trivial commutation amounts from pension into Isa
• Scrap rules that mean cash held within a stocks and shares Isa is effectively subject to basic rate tax. This would remove the need for transfers between Isas of any type and enable savers to choose how they allocate their Isa allowance between cash and stocks and shares.
