ISAs

ISAs were introduced on 6 April 1999, replacing the earlier Personal Equity Plans (PEPs) and Tax-Exempt Special Savings Accounts (TESSAs), which continued to exist only for money already invested in them and for interplan transfers. An ISA can contain two components:

1. A cash component: a cash deposit that is similar to any other ordinary savings account, apart from the tax-free status. A TOISA must consist solely of a cash deposit.

2. A stocks and shares component: the money is invested in 'qualifying investments' consisting of any combination of stock market equity investments (with no geographic restriction), public debt securities such as government or corporate bonds, or cash "awaiting investment". As a consequence, the risk profile of the ISA may be anything from low to high. The investments may also include or consist of property funds or derivatives such as options. This element may be self-invested and managed through a stockbroker, but the majority of investors invest collectively through a collective investment such as a unit trust, OEIC or investment trust.

Investors are only permitted to invest their Stocks and Shares component with a single financial institution in any year. For investments into collective funds, these institutions have traditionally been the fund management companies themselves. This creates a difficulty for investors wishing to diversify their investment into the collective funds of different fund management companies in the same year. It also means that investors wishing to transfer existing ISA holdings have to transfer the ISA itself between providers, which can be a time consuming process.  To avoid these problems, a number of Fund Supermarkets have been set up. These are organisations which act as ISA providers who offer access to a wider range of collective investments from a variety of fund managers. They allow investors to build a more diversified portfolio within a single ISA and to transfer their investments between funds without the complication and delay of changing ISA provider. Fund Supermarkets are promoted by many Independent Financial Advisers and have quickly become popular because they allow investors greater choice and flexibility at no extra charge. Instead of charging the investor, the Fund Supermarkets are paid by the fund managers out of their usual charges.


Home
Antiques
Art
Children's Savings
Collectables
Commodities
Currencies
Hedge Funds
ISAs
Investment Bonds
Investment Trusts
National Savings
OEICS & Unit Trusts
Options & Futures
Property
REITs
Savings Accounts
Spread Betting
Stocks & Shares
Contact Us