IR2008 - ISAs and PEPs

 

Individual Savings Accounts (ISAs)

Contents

What is an ISA?

An ISA is a type of savings account. Basically, if you save in an ISA you are entitled to keep all that you receive from that investment and not pay any tax on it. This is not the case with, for example, an ordinary bank or building society account unless you are a non-taxpayer. See our booklet IR111 'Bank and Building society interest. Are you paying tax when you don't need to?' (PDF 564K) and A Guide for Savers for more information on bank and building society accounts.

ISAs began on 6 April 1999 and will be around until at least 6 April 2009. You can start with small amounts and save up to £7,000 each tax year until 2005-06 and up to £5,000 in each tax year from 2006-07. The reduction from £7,000 to £5,000 after 5 April 2006 is subject to consultation. A tax year runs from 6 April to 5 April in the following year.

You can put money in and take it out whenever you want and you do not even have to tell your Inland Revenue office that you have an ISA.

The ISA scheme provides different ways of saving to meet people's different needs. You can plan for the short term, or put your money away for much longer.

Until April 2005 there are three ways - called 'components' - in which your money can be invested: cash savings, stocks and shares and some specially designed life insurance policies.

  • Cash ISAs may be suitable for short-term savings, so that you can get at your money easily.
  • Stocks and shares ISAs may be appropriate if you can afford to leave your money untouched for longer than, say, five years. However, your investment may go down in value as well as up and there are no guarantees that you will make a profit.
  • Life insurance ISAs are also for long-term saving and offer some built-in life cover in the case of your death. Again, there are no guarantees that you will make a profit and you may get back less than you put in, particularly if you take your money out after only a few years. However, some types of policy, including 'with profits' policies, are designed to iron out the ups and downs of the stock market.

After 5 April 2005, the life insurance ISA is merging with the stocks and shares ISA. However, you will still be able to hold life insurance products in your ISA.

Where do I get one?

You can get ISAs by going to an ISA manager. These include banks, building societies, National Savings and Investments, some supermarkets and retailers, friendly societies, insurance companies, unit and investment trust companies, financial advisers, fund supermarkets and stockbrokers. Your ISA manager will look after your account for you.

ISA managers will give you details of the ISAs they offer and may provide advice about which one would be right for you. (Not every ISA manager will offer every type of ISA.) Alternatively, you could go to an independent financial adviser for help in choosing the best option. The Financial Services Authority's booklet 'The FSA guide to financial advice' gives more information. You can get it by calling the FSA Consumer Helpline on 0845 606 1234 or from their website at Financial Services Authority.

Simply apply to the ISA manager of your choice. You could visit a branch, or write to them. Some companies allow you just to telephone, fax or e-mail. How to choose an ISA Manager

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 Inland Revenue 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. The spouse of one of these people can also open an ISA. You cannot hold an ISA jointly with, or on behalf of, anyone else.

Information about ISAs for those aged under 18 and the options available when you reach 18
Information about moving abroad

What are the different sorts of ISA?

There are two types of ISA: Mini ISAs and Maxi ISAs. You can put money into either of them 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, which could be with the same or different ISA managers.

    Until 5 April 2005, there are three types of Mini ISA

    • cash
    • stocks and shares, and
    • life insurance.

After 5 April 2005, life insurance is merging with stocks and shares so there will only be two types of Mini ISAs.

There are other differences between Maxi and Mini ISAs, and ISA managers can advise you about these. For more detailed information go to 'How much can I put into ISAs'.

What is a CAT standard ISA?

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 are 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.

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

Managers of CAT standard ISAs are committed to treating customers fairly. This means they 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 are not forced to buy any other product along with a CAT standard ISA.

The CAT standards

There are different CAT standards for cash, stocks and shares and life insurance ISA investments.

The standard for cash ISAs

Charges

  • There must be no one-off or regular charges of any kind, such as charges for withdrawals or for any regular service (for example, use of cash machines). However, charges for replacements such as duplicate statements or lost cards are permitted.

Access

  • The minimum transaction must be no greater than £10.
  • Savers must be able to withdraw their money within seven working days or less.

Terms

  • The interest rate must be no lower than two percentage points below base rate.
  • Upward interest rate changes must reflect base rate movements within a calendar month. Downward changes may be slower.
  • There must be no other conditions (for example, limits on frequency of withdrawals).

The standard for stocks and shares ISAs

Charges

  • The total charge must be no more than 1% of net asset value per year.
  • The saver must not pay any other charges.

Access

  • You must be able to put in amounts as small as £500 for a lump sum or £50 a month for regular savings.

Terms

  • Investment may be in authorised unit and investment trusts or in open-ended investment companies.
  • A fund must be at least 50% invested in ISA-qualifying shares and securities that are listed on European Union stock exchanges.
  • Units and shares must be single priced (that is, no separate buying and selling prices).
  • Product literature must highlight the investment risk.

A CAT standard stocks and shares ISA may hold units or shares in one or more funds which meet these requirements. If holding them in the ISA entails any additional features (for example, additional charges), these should be taken into account in deciding whether the ISA meets the standard.

The standard for life insurance ISAs

Charges

  • The annual charge must be no more than 3% of the value of the fund.
  • There must be no other charges (for example, a separate charge for the guarantee on surrender values).

Access

  • The minimum premium must be no more than £25 a month for regular savings, or a £250 lump sum.

Terms

  • Surrender values should reflect, over time, the value of the underlying assets of the fund.
  • There must be no specific surrender penalties.
  • Three years after paying a premium, and thereafter, the surrender value should at least return the value of the premium.

A CAT standard life insurance ISA may hold one or more life insurance policies. If holding them in the ISA entails any additional features (for example, additional charges), these should be taken into account in deciding whether the ISA meets the standard.

A CAT standard life insurance ISA may permit lump-sum savings, regular savings, intermittent savings or any combination of these. The surrender value guarantee applies separately to each premium payment.

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 Maxi or Mini ISAs or both. 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.

After 5 April 2005, life insurance can still be held in an ISA and will normally be part of the stocks and shares ISA. So, if you want to invest in both shares and life insurance you will need to find a single manager who can offer both.

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.

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. Appendix A and B (PDF 933K) provides a list of approved ISA and PEP managers.

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 cannot 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). You may want to consider this when taking out an ISA.

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. A particular ISA may only allow certain types of savings or investments. If you want to include savings and investments that are not available for your ISA, you may have to transfer to another manager.

You can only 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. 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 ISAs can I have?

There are limits on the number of ISA accounts you can subscribe to each tax year.

  • Up to 5 April 2005, 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.
  • After 5 April 2005, you will only be able to put money into either one Maxi ISA or up to two Mini ISAs – one each for cash and stocks and shares, as life insurance is merging with stocks and shares.

But in different years, you could choose to save with different managers. There are no limits to the number of different ISAs you can hold over time.

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.

Do you currently subscribe to a life insurance Mini ISA and another type of Mini ISA?

How much can I put into ISAs?

In each of the tax years up to 2005-06 you can put in up to £7,000. You can then put in up to £5,000 in each subsequent tax year from 2006-07. A tax year runs from 6 April to 5 April the following year. The reduction from £7,000 to £5,000 after 5 April 2006 is subject to consultation.

Up until 5 April 2005, you can put money into any of the three components of a Maxi ISA. If you do not put the maximum allowed into the cash or life insurance components (where they are offered by the Maxi ISA), you can put the excess into the stocks and shares component.

After 5 April 2005, you can put money into either of the two components of a Maxi ISA. If you do not put the maximum allowed into the cash component (where it is offered by the Maxi ISA), you can put the excess into the stocks and shares component (which will include qualifying life insurance policies).

With Mini ISAs the limits are fixed. For example, even if you put nothing into a Mini cash ISA during the year, you could still only put £3,000 into a Mini stocks and shares ISA.

This table shows how many ISAs you can have and how much money you can put into each.

 
The options in a tax year
Total investment allowed a year up to 2004-05
Total investment allowed in 2005-06
Total investment allowed in 2006-07* and subsequent years
One Maxi ISA Up to £7,000 but no more than £3,000 in cash and £1,000 in life insurance Up to £7,000 but no more than £3,000 in cash Up to £5,000 but no more than £1,000 in cash
Up to three Mini ISAs reducing to two after
5 April 2005
  • £3,000 maximum in stocks and shares ISA
  • £3,000 maximum in cash ISA
  • £1,000 maximum in life insurance ISA
  • £4,000 maximum in stocks and shares ISA (which includes life insurance)
  • £3,000 maximum in cash ISA
  • £4,000 maximum in stocks and shares ISA (which includes life insurance)
  • £1,000 maximum in cash ISA

* The reduction from £7,000 to £5,000 after 5 April 2006 is subject to consultation.

Whether you choose a Maxi or a Mini ISA in any year is up to you, but remember

  • if you want to invest more than £3,000 in stocks and shares (or £4,000 after 5 April 2005), you must open a Maxi ISA
  • if you want different ISA managers for different kinds of saving, you will need Mini ISAs
  • always shop around for the arrangement that will give you the best deal or is most convenient.

The Mini cash ISA
The Mini stocks and shares ISA
The Mini insurance ISA
The changes at 6 April 2005

What are the tax benefits of an ISA?

  • You pay no tax on any of the income you receive from your ISA savings and investments. This includes dividends, interest and bonuses.
  • You pay no tax on capital gains arising on your ISA investments (losses on ISA investments cannot be allowed for Capital Gains Tax purposes against capital gains outside your ISA).
  • The insurer does not have to pay tax on income and capital gains on investments used to back your ISA life insurance policies. You do not have to pay any tax when the policy pays out.
  • You can take your money out at any time without losing tax relief.
  • You do not have to declare income and capital gains from ISA savings and investments or even tell your Inland Revenue office that you have an ISA.

I am under 18 – can I have an ISA?

If you are aged 15 or under, you cannot have an ISA.

If you are aged 16 or 17, you can have a cash ISA. This can be either a Mini cash ISA or a Maxi ISA where you can only put money into the cash component. The subscription limits are the same as for savers who are over 18 (up to £3,000 in each tax year up to 2005-06 and then £1,000 a year after that).

Information about money given by parents.

If you have put money into a Mini cash ISA in the tax year in which you reach 18, you can go on doing so on and after your 18th birthday, subject to the normal limit. Once you have reached 18 you can also apply to open a Mini stocks and shares ISA (and if you are 18 before 5 April 2005, you can open a Mini insurance ISA). You will have to complete a new application in the same way as any other investor.

If you have been putting money into the cash component of a Maxi ISA in the tax year in which you reach 18, you can go on doing so on and after your 18th birthday, subject to the normal limit. Once you have reached 18, you can also put money into the stocks and shares component, and, if you are 18 before 5 April 2005, the insurance component of your Maxi ISA. As this is a Maxi ISA, you will not have to complete a new application.

You cannot put money into a Mini cash ISA and a Maxi ISA in the same tax year.

Can I put money into an ISA for my child?

Children aged 15 or under cannot have an ISA.

Children aged 16 or 17 can have a cash ISA. This can be either a Mini cash ISA or a Maxi ISA where you only put money into the cash component. The subscription limits are the same as for savers who are over 18 (up to £3,000 in each tax year up to 2005-06 and then £1,000 a year after that).

ISAs for 16 and 17 year-olds are primarily for those in full or part-time employment, including those still at school with, for example, Saturday jobs. But some young people will also use ISAs to save money given to them by their parents.

If you give your child money to invest in an ISA account, and the total investment income arising on all gifts from you, not just in ISAs, exceeds £100 in any tax year, all the income arising will be treated as part of your income for that tax year for income tax purposes. You should report that income to your Inland Revenue office.

This rule does not prevent you from giving your child money to invest in an ISA - you just have to take care not to give your children too much. The £100 income limit for each child applies to each parent, not to both taken together.

What happens if I die?

Your ISA will end on the date of your death. There will be no tax to pay on income or capital gains up to that date, but your personal representatives will have to account for tax on any income or gains arising after your death. The ISA manager will either

  • sell the investments and pay the proceeds to your personal representatives (or a beneficiary of your estate), or
  • transfer the investments directly into their hands.

The terms and conditions of the ISA may specify which it will be.

An ISA life insurance policy will pay out on your death. Your personal representatives will have to claim the death benefit. There will be no tax to pay on income or capital gains that arise before the insurer accepts the claim. However, your personal representatives will be taxed on any interest that is paid if there is then a delay in paying out the claim. The insurer will deduct tax at the lower rate before paying over the interest.

ISA investments form part of your estate for Inheritance Tax purposes.

What happens if I go abroad?

You can only open an ISA if you are resident and ordinarily resident in the UK for tax purposes (ask your Inland Revenue 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. Their husband or wife can also open an ISA.

If you start an ISA in the UK and then go abroad, you cannot continue putting money into the ISA (unless you are a Crown employee working overseas or their husband or wife). However, you can keep your ISA and you will still get tax relief on investments held in the ISA. When you return, you can start putting money in again (subject to the normal annual limits).

What if I pay into too many ISAs?

If, by mistake, you put money into

  • more than one Maxi ISA
  • a Maxi and a Mini ISA, or
  • more than one Mini ISA of the same type in the same tax year
    then the payment into the second ISA is invalid, and you are not entitled to any tax relief on investments held in the second ISA.

You must tell the manager of the second ISA as soon as possible that it is invalid. You cannot correct this mistake by closing the first ISA. If you are unsure about what to do call the Inland Revenue Helpline on 0845 604 1701 for advice.

What if I want to take my money out?

You can take your money out at any time, without losing any tax benefits you have already built up. However, some ISAs may run for a fixed period or require notice of withdrawal and you may lose some interest or a bonus if you withdraw early. In some cases, there may also be a penalty if you surrender an ISA life insurance policy early.

With stocks and shares or life insurance, you may not get back all the money you put in, particularly if you withdraw during the early years of an investment.

If you take money out, any that you put back later will count against the ISA annual subscription limit in the year that you re-invest your money.

Example
Denise opens a Mini cash ISA with £2,500. A few weeks later she withdraws £2,000. Later in the same year, Denise decides to replace the money by putting new funds into the account. However, she can only replace £500. This is because the annual subscription limit for a Mini cash ISA account is £3,000 in each tax year, and Denise already put in £2,500 when she first opened the account.

What happens if I change my mind?

Some ISA managers will offer ISA products that give you a 'cooling off' or cancellation period (usually 7 or 14 days), in which you can change your mind about buying. Provided you cancel within the period set out by that ISA manager the payment made will not count as a subscription into an ISA in that tax year.

If you change your mind within that time, you will be free to put money into an alternative ISA in the same tax year with the same or a different manager.

If you change your mind after that time, or in a case where there is no cancellation or cooling off period, you will still count as having put money into that ISA, and your choice of a new ISA will be restricted in the same tax year. However, you could transfer the existing ISA to another ISA manager.
Transferring your ISA

Can I put shares from my employee share scheme into my ISA?

If you are in

  • an Inland Revenue approved all-employee share scheme run by your employer (that is, a savings related share option - 'Sharesave' - or profit sharing scheme), or
  • the new Share Incentive Plan
    then you can transfer any shares you get from that scheme into the stocks and shares component of an ISA without having to pay Capital Gains Tax, provided your ISA manager agrees to take them. The value of the shares at the date of transfer counts towards the annual limit.

This means you can transfer up to £7,000 worth of shares in each of the tax years up to
2005-06, or £5,000 in any later year from 2006-07 (assuming that you make no other subscriptions to ISAs, in those years). (The reduction from £7,000 to £5,000 after 5 April 2006 is subject to consultation.)

Remember that if you want to transfer more than £3,000 worth of shares you must have a Maxi ISA

You must transfer the shares within 90 days from the day they emerge from the scheme. Or, in the case of an approved profit sharing scheme, from the third anniversary of the date you received the shares, if earlier. Your employer should be able to tell you more.

Can I put windfall or inherited shares in my ISA?

No. You can only transfer shares you own into an ISA if they have come from an employee share scheme. Otherwise, the ISA manager must purchase shares on the open market.

The situation is the same if you have shares that you have inherited. You are not able to transfer them into an ISA.

Can I use an ISA to back a mortgage?

You can use the proceeds from ISA investments for any purpose, but you should discuss the implications with your financial adviser or mortgage lender.

Can I get reports and accounts of the companies in my stocks and shares ISA?

Your ISA manager can arrange for you to receive reports and accounts, although there may be a charge. You may also be able to attend and vote at the annual meeting of companies in which your ISA invests.

What can the cash component include?

The cash component of an ISA can include

  • bank and building society accounts
  • units or shares in UK authorised unit trusts and open-ended investment companies (OEICs) which are money market schemes (sometimes called 'cash funds') and fund of funds schemes which invest in them
  • National Savings and Investments products which are specially designed for ISAs (but not other National Savings and Investments products such as the Investment Account, Savings Certificates or Pensioners' Guaranteed Income Bonds)
  • certain shares and units that fail to meet the qualifying conditions for the stocks and shares component
  • after 5 April 2005, life insurance policies that fail to meet the qualifying conditions for the stocks and shares component (these will generally be policies that guarantee to return your capital at any time)
  • after 5 April 2005, the stakeholder cash product.

What can the stocks and shares component include?

The stocks and shares component of an ISA can include

  • shares and corporate bonds issued by companies listed on a recognised stock exchange anywhere in the world
  • gilt edged securities ('gilts'), similar securities issued by governments of other countries in the European Economic Area and 'strips' of all these securities
  • units or shares in UK authorised unit trusts or open ended investment companies (OEICs) which invest in shares and securities (called securities schemes and warrant schemes) and fund of funds schemes which invest in them
  • shares and securities in approved investment trusts (except property investment trusts)
  • units or shares in Undertakings for Collective Investment in Transferable Securities (UCITS) funds based elsewhere in the European Union (these are similar to the UK authorised unit trusts and OEICs listed above)
  • any shares which have been transferred from an Inland Revenue approved all-employee scheme under the special rules
  • after 5 April 2005, life insurance policies that would previously have qualified for the separate life insurance ISA component
  • after 5 April 2005, stakeholder medium-term products.

These investments must meet certain conditions to qualify for ISAs. ISA managers will be able to tell you which ones can be included in their own ISAs.

Holding cash in the stocks and shares or insurance components

Cash may only be held in the stocks and shares and life insurance components of ISAs to invest in qualifying stocks and shares or life insurance policies. This includes cash subscriptions, interest and dividends, and proceeds from disposals of qualifying investments which have not yet been reinvested.

The ISA manager may pay interest on this cash while it is held in the account. There is no income tax to pay on this interest, but the manager by law must deduct a flat rate 20% charge before crediting it to the account. You do not have to declare this interest on a tax return.

What can the life insurance component include?

The life insurance component of an ISA can include

  • 'unit linked' or 'investment linked' policies. This is like a 'pooled' investment such as a unit trust
  • 'with profits' policies. This is a more traditional type of life insurance policy where you participate in the profits the insurer makes from investing your premiums through 'bonuses' which the insurer declares, usually once a year.

The life insurance component can include only certain life insurance policies on the saver's own life, which are specially designed for ISAs. These may be the ISA manager's own policies, or the ISA manager may offer a range of policies from different insurers.

ISA policies must meet a number of conditions to qualify. Managers of life insurance ISAs will be able to give you details of their own policies.

After 5 April 2005, life insurance policies can still be held in an ISA, but will usually be one of the investment options in the stocks and shares component.

Information about holding cash in the stocks and shares or insurance component.

What is changing after 6 April 2005?

On the 6 April 2005 the ISA rules are changing and from that date

  • new 'stakeholder' cash and medium term products can be held in your ISA
  • you will still be able to hold an insurance policy in your ISA, but the separate 'Mini insurance ISA component' will end and instead, depending on the type of insurance policy you hold, your policy will now qualify for the
    • Mini ISA cash component – with an unchanged limit of £3,000
    • Mini ISA stocks and shares component – with an increased limit of £4,000, or
    • Maxi ISA – with a limit of £7,000.

Your ISA manager will tell you which component your insurance policy qualifies for.

If you currently pay into an ISA insurance policy, it will be possible to continue paying into that policy after 5 April 2005. But if you also subscribe to either a Mini cash or a Mini stocks and shares ISA component you may have to rearrange your savings.

Will the changes at 6 April 2005 affect me?

The changes could affect you if

  • you subscribed to an ISA insurance policy before 6 April 2005 plus another type of ISA component and you intend to continue to invest in both after 5 April 2005
  • you want to buy a Mini ISA stocks and shares component, because from 6 April 2005 the amount you can invest will increase to £4,000.

If you have an existing ISA insurance policy the ISA Manager for that policy should have contacted you to tell you about the changes.

If you are in doubt you should contact your ISA Manager.

Further information about the changes after 6 April 2005

Which ISA component will my policy fall in when the insurance ISA component ends in April 2005?

  • It will fall in either the Mini ISA cash or stocks and shares component, depending on the nature of the policy.
  • If you paid into your policy between April 2004 and April 2005, you should have received a letter from your ISA Manager telling you which component it falls in.
  • If you took your policy out before 6 April 2004, it will automatically fall in the stocks and shares component.
  • If you have not heard from your ISA Manager, you should contact them before paying into any other ISA component after 6 April 2005.

I already hold an ISA Insurance policy. Can I continue paying into it?

Yes, but only if you do not also pay into another ISA component of the same type with a different ISA manager. For instance, if your policy falls in the Mini stocks and shares component you can only continue paying into it if you do not also invest in another Mini stocks and shares component with a different manager.

If you do, then you will have two Mini ISAs of the same component. One of them could become void, and if this is the component containing the insurance policy then that policy will have to end.

In most cases your ISA insurance policy will be a Mini ISA stocks and shares component, but this is not always the case. If your insurance policy qualifies as a Mini ISA cash component, you cannot hold another cash component with another ISA manager. You must check with the ISA manager who sold you the insurance policy.

I have regularly paid into an ISA insurance policy and an ISA unit trust investment with different ISA managers, I've been told I cannot do that from April 2005, is this true?

  • If, after 6 April 2005, your insurance policy is treated as a stocks and shares component then you will need to choose which to continue paying into.
  • ISA rules do not allow anyone to invest in two ISA investments with different managers if they fall in the same component. For example, you cannot have two Mini ISA stocks and shares components.
  • If you want to continue to subscribe to both then from April 2005 you can only do so through a single ISA Manager.
  • You can still invest as much as you did before, as the stocks and shares component investment limit will increase to £4,000.
  • All ISA products ensure that you are under no obligation to continue making payments into that policy but you should contact your ISA managers to discuss the impacts on each investment if you stop making payments.

I have been told that my policy will fall in the Mini cash component. Can I continue paying into it and take out a separate £3,000 cash deposit component?

No. Unless both are held with the same ISA manager, from April 2005 you cannot take out a separate Mini cash deposit component whilst also continuing to pay into an insurance policy which falls in the cash component.

Even if the same ISA manager manages both products, the total that you may invest in the two products is restricted to £3,000.

What if I have a complaint?

The first step is to take it up with your ISA manager. They will have a complaints procedure, which should be able to help you. If you are not happy with the answer you get, you can take the matter up with the Financial Ombudsman Service.

The Ombudsman Service aims to resolve individual disputes between consumers and financial firms. It is free for consumers and is an informal alternative to the courts. You can contact the Ombudsman Service by phone on 0845 080 1800 or on their website at www.financial-ombudsman.org.uk

 

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