New Rules for ISAs and PEPs

Money Wise spring 2007

The Chancellor has proposed several changes to Individual Savings Accounts (ISAs) and Personal Equity Plans (PEPs), with effect from April 2008:

ISAs are to be made ‘a permanent part of the savings landscape’. Before this announcement, the ISA (and PEP) tax regime had an end date of 5 April 2010.
The overall contribution limit for ISAs will be ‘at least £7,000’ — the current limit.
PEPs will be brought within the ISA regime. However, providers will not be forced to merge accounts once PEPs become subject to ISA rules.
The distinction between mini-ISAs and maxi-ISAs will be scrapped. Currently you cannot subscribe to both a mini-ISA and a maxi-ISA in the same tax year. However, there is no plan to abandon the £3,000 investment limit for the ISA cash component.
It will be possible to transfer from the cash component of an ISA to the stocks and shares component for past years without affecting the current year's limits.

Past performance is not a guide to the future. A new investment may not equal or outperform the original. Values can go down as well as up and you may not get back the full amount invetsted.

ISA Planning

Have you made your maximum contribution for the current tax year? There is no carry forward provision, so use it or lose it is the rule.
When will you make your 2007/08 ISA contribution? If you delay until the last moment (early April 2008) potentialyy you lose on a year's worth of tax priviliges on your investment.
Do your PEP and ISA investmentsneed to be reviewed and restructured? The first PEPs reached the grand old age of 20 at the start of 2007 and the original ISAs are now nearly eight years old. What made sense when you chose your plans may not be right for you now.

Keeping an eye on these simple savings vehicles could be very worthwhile.