ISA 5-Year Maturity Cap and Carryover Ban Scraped

[Anchor]

The Individual Comprehensive Asset Management Account (ISA) reform plan, which had faced fierce backlash from young people and investors, has been completely scrapped. Both the ban on carrying over contribution limits and the limit on contract periods have been withdrawn.

Reporting by Chae Heesun.

[Reporter]

The ISA is a tax-advantaged asset management account based on net profit upon maturity. The general type offers tax exemptions up to 2 million won, with a 9.9% tax rate applied to the excess amount.

Its main advantage was the ability to extend maturities and adjust the timing of tax settlements.

However, in its previous reform proposal, the government decided to limit the contract period for general ISAs to a maximum of 5 years, and up to 10 years for the newly introduced productive finance ISA.

It also prohibited carrying over unused annual contribution limits to the following year and set a sunset clause requiring subscription by the end of 2029 to receive tax benefits.

Criticism followed that this disadvantageous system targeted self-employed individuals and freelancers with fluctuating incomes, and contradicted the original purpose of the ISA to encourage long-term asset management.

[Kim Hyun-dong / Professor, Department of Business Administration, Pai Chai University: The ISA was originally introduced to support the formation of public assets, and because it provides tax benefits through exemptions and low taxation, it is necessary to encourage the participation of vulnerable asset groups. Yet, this actually limits the practical effectiveness of the system...] (Translation of professor interview)

Ultimately, the government decided to allow both general ISAs and productive finance ISAs to carry over remaining annual contribution limits to the next year.

While setting a minimum contract period of 3 years for both accounts, the government abolished the maximum contract period limit, allowing subscribers to maintain their accounts for as long as they wish.

The sunset clause, which had been set for the end of 2029, was also eliminated.

In addition, the government decided to allow duplicate subscriptions for the youth productive finance ISA and the youth future savings account, which were initially blocked in the original draft.

Since major reform details have essentially reverted to the way they were, leaving little more than the creation of new products, criticisms are rising that there was a lack of sufficient preliminary review and that policy reliability has been damaged.

(Camera: Lee Jae-young, Video Editing: Yoon Tae-ho, Design: Hwang Se-yeon)
※ Please note: This article was translated by AI and may contain errors.