ISAs, PEPs and TESSAs Guide

ISAs (Individual Savings Accounts)

Your Querstions Answered

Can I have an ISA?
To open an ISA you have to be aged 18 or over, or for cash ISAs aged 16 or over. You also have to be resident and ordinarily resident in the UK for tax purposes (ask your Tax Office if you are in any doubt about this).

Crown employees, such as diplomats or members of the armed forces, who are working overseas and paid by the Government are eligible to open an ISA. From 6 April 2001, the husband or wife of one of these people can also open an ISA.

You cannot hold an ISA jointly with, or on behalf of, anyone else.

How do I choose an ISA?
Types of ISA
There are three types of ISA: Mini ISAs, Maxi ISAs and TESSA only ISAs. You can put money into any of the three in any tax year, but you cannot put money into both a Mini ISA and a Maxi ISA in the same tax year.

A Maxi ISA can include cash, stocks and shares and life insurance in a single ISA with one manager.

Mini ISAs mean you can have separate ISAs, with different managers, for cash, stocks and shares and life insurance.

A TESSA only ISA can only be opened with capital from a matured TESSA.

There are other differences between Maxi and Mini ISAs, and ISA managers can advise you about these. For more detailed information look here.

Standards to look for

The Government has laid down a set of standards to help savers find ISAs that offer reasonable Charges, easy Access, and fair Terms – which is why they’re known as the ‘CAT’ standards.

You may want to see if the ISA you are considering meets the relevant standard. ISAs that do are likely to make this clear in their leaflets and posters.

But remember, CAT standard ISAs will not necessarily be suitable for all savers. If a product meets the CAT standards, this does not mean that the performance of the investment is guaranteed, or that the product is approved by the Government.

For more detailed information on the CAT standards turn to page 14.

What the standards promise

Managers of CAT standard ISAs are committed to treating customers fairly. This means they will use plain English and avoid complex or misleading features. In other words, CAT standard ISAs should be simple, clear and fair.

CAT standard ISAs are available for sale on their own. Savers will not be forced to buy any other product along with a CAT standard ISA.

How do I choose an ISA manager?

Things to bear in mind
Does the ISA manager offer the kind of ISA you want? Managers may offer both Maxi, Mini and TESSA only ISAs, or only one. They may offer cash ISAs, stocks and shares ISAs and life insurance ISAs, or only one or two of these.

Some managers may offer ISAs that can include only that company’s own products. Others may offer a choice of their own or other companies’ products. Or they may offer ‘self-select’ ISAs, where you can choose from a wide range of shares and securities.

What are the charges? Make sure you know whether the ISA manager will charge for running your ISA, including any charges for withdrawals and transfers. CAT standard ISAs have limits on charges. Click here for more detailed information on the CAT standards.

All ISA managers must be approved by the Inland Revenue and authorised by the Financial Services Authority (FSA), but neither they nor any other Government Department have approved any ISAs. Approval does not guarantee an ISA manager’s performance, or that the ISA investments will produce a satisfactory return.

Switching from one ISA manager to another

You can transfer your ISA to another ISA manager whenever you want.

You can usually transfer simply by asking the new ISA manager to arrange the transfer. Your existing ISA manager can’t stop you transferring, but they may make you pay a charge, or insist that you sell any existing ISA investments and transfer cash (this will be specified in the ISA manager’s terms and conditions).

Note: Your ISA must be transferred directly between the two managers. You cannot transfer your ISA by closing it and opening a new ISA with the new ISA manager.

ISA cash, savings and investments must always remain in the same component. You cannot move funds from, say, a cash ISA with one manager to a stocks and shares ISA with another.

You are only allowed to put money into one Maxi ISA or one Mini ISA of each type in a tax year. So, if you want to transfer the money you have put into your ISA in the current tax year, you must transfer all of it, and any more money you want to put in this year must go into the new ISA.

You can transfer all of the money you put into your ISA in earlier years or only some of it, if you wish. However, some managers may not allow you to transfer part of your ISA (this will be in the terms and conditions). Your existing ISA manager will be able to tell you how much you can transfer.

How many and how much ….?

How many ISAs can I have?

You can hold as many ISAs as you want, but you can only put money into either one Maxi ISA or up to three Mini ISAs – one each for cash, stocks and shares and life insurance, in anyone tax year.

You cannot put money, for example, into both a Maxi ISA and a Mini ISA in the same tax year, or into two Mini cash ISAs.

You may also be able to put money into a TESSA only ISA if you have a TESSA that has matured. See page 22 for more detailed information about this.

How much money can I put into ISAs?

In each of the tax years 2001/2002 to 2005/2006 you can put in up to £7,000 in total (plus any capital sum from a matured TESSA – see page 22). You can then put in up to £5,000 in each subsequent tax year from 2006/2007. A tax year runs from 6 April to 5 April the following year.

Each year the money can be put into either

  2001-2006 Later Years
one Maxi ISA total £7,000 total £5,000
of which these amounts can be put into    
     
stocks and shares up to £7,000 up to £5,000
cash up to £3,000 up to £1,000
life insurance up to £1,000 up to £1,000
     
or Mini ISAs for    
stocks and shares up to £3,000 up to £3,000
cash and up to £3,000 up to £1,000
life insurance up to £1,000 up to £1,000

Remember, you can only put money into either one Maxi ISA or up to three Mini ISAs (one for each type of saving) in each tax year.

Turn to these pages for more detailed information on limits.

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