With the choice of ISAs now larger than ever, Joe McGrath considers whether there is any value in opting for a corporate ISA.

Every ISA season, providers try to think up new ways to attract new business, and most investors will have already considered the pros and cons of stocks and shares ISAs, cash ISAs and self-select ISAs.

However, most investors overlook the opportunities that may exist right under their nose through their employer. That could all be about to change, though, given the latest buzz around the corporate ISA.

Larger companies in the UK such as Morrisons, BP, Hays, Mitchells & Butlers and BT are already offering these tax-efficient savings accounts to their employees, and the number of companies doing so is likely to expand yet further in the coming months.

The number of providers behind these schemes is also expanding. Friends Provident says it intends to enter the market later this year, joining Brewin Dolphin, Barclays Stockbrokers, Legal & General and Killik & Co, among others.

Low-cost option
Those schemes already launched have a variety of different benefits to investors, but most centre on costs and the method by which employees invest in their account. Investors in such schemes may wish to take advantage of the reduced costs. Because the employer sponsors the facility, the cost of investing can be lower than going it alone in an individual ISA. However, the flip side is that the investment options can sometimes be limited.

The Barclays product, for example, is designed especially for stocks and shares. Companies that use the Barclays scheme must hold a minimum of £1,000 of their own shares in each ISA account at all times. Killik’s corporate ISA is also designed to hold shares of an employer.

The benefit, of course, is that investors can hold the shares from their employer’s save-as-you-earn (SAYE) or share incentive plan schemes up to the annual limits. Once the shares are held in the account, no tax is payable when the shares are sold on later.

Financial advisers have mixed views on the product, but most believe that the option of regular ISA saving from salaries will prove exceptionally popular.

John Stewart, managing director at Essex-based financial adviser PMI, says, ‘Payment from source is really quite attractive and it does make a difference.’

However, Stewart notes that these products will only be successful if access to a financial planner or technical expert is permitted at each employer.

Nicola Nicklin, corporate pensions sales and strategy manager at Friends Provident, explains that businesses are embracing such schemes because they allow employees the ability to save directly from their salary.

She adds, ‘There is an awful lot of noise about this marketplace at the moment, and a lot of providers are starting to investigate whether they should launch in this marketplace. We are looking to launch something towards the end of 2010.’

Integrated saving products
Legal & General’s product launched earlier this year and allows employee investors to transfer savings accrued in SAYE schemes from the corporate ISA to a self-invested personal pension at any time. At the time of launch, L&G underlined the benefits to employee investors of having all of their investments together in one place, linked to their place of work.

Tony Filbin, managing director of Legal & General’s workplace savings division, explains that employers are taking a greater interest in the financial health of their employees as this can often have an impact on staff members’ work lives: ‘It is now possible for companies to take an even bigger step to drive workplace savings and integrate their pension with a corporate ISA.’

L&G’s corporate ISA has an associated online ‘platform’ that allows investors to profile their investments, learn more about their financial planning goals and make additional contributions.