Individual Savings Account

A Individual Savings Account (ISA) is a financial product available in the UK, designed for the purpose of tax-free savings. ISAs were introduced on April 6 1999, replacing the earlier PEPss and TESSAs - they were explicitly designed to appeal to a broader range of the population than these earlier products, which were sometimes claimed to be exclusively for the benefit of the middle class. However they have been criticised as confusing.

Table of contents

1 Mini and maxi ISAs 2 Subscription limits 3 CAT standards

Mini and maxi ISAs

There are two types of ISA: 'mini' and 'maxi'. You can only invest in one ISA in a tax year. An ISA can contain up to three components:

• Cash - apart from the tax-free status, these are similar to ordinary savings accounts
• Stocks and Shares - in these, the money is invested in the stock market (therefore, a more risky investment)
• Life insurance - although these have proved far less popular than the other components

In a mini-ISA, the three components may be from different providers. In a maxi-ISA, only one provider is allowed.

Subscription limits

The amounts which may be deposited in an ISA in a financial year are:

• For a mini-ISA:
  • Cash:£3000
  • Stocks and Shares:£3000
  • Life insurance:£1000
• For a maxi-ISA:
  • Cash:£3000
  • Stocks and shares:£7000
  • Life insurance:£1000
  • However the total subscription limit is still £7,000

These limits are subject to change by the Chancellor of the Exchequer.

CAT standards

In April 1999 the Government introduced a voluntary CAT (for "Charges, Access, and Terms") standard for ISAs, to make them easier for inexperienced customers to understand, and harder to mis-sell. It does not guarantee the investment performance. Many products now comply with this standard.