ISA & PEP Questions and Answers
Q. What are my ISA investment options now?
A. From April 2008 you will be able to invest in one cash and one stocks and shares ISA each tax year. The annual ISA investment allowance has now risen to £7,200 per tax year. Up to £3,600 of that allowance can be saved in cash with one provider. The remainder of the £7,200 can be invested in a stocks and shares ISA with the same or another provider.
For example, you can chose to save £1,000 in a cash ISA with one provider and £6,200 in a stocks and shares ISA with another.
Q. What happens to my PEP?
A. All PEP accounts will automatically become a stocks and shares ISA. You will be able to invest in this re-labelled PEP,which is now a stocks and shares ISA, as long as you haven’t subscribed to another stocks and shares ISA during the current tax year.
Q. What happens to my existing ISAs?
A. Mini cash ISAs, TOISAs and the cash component of a Maxi ISA will all be reclassified as ‘cash ISAs’. Mini stocks and shares ISAs and the stocks and shares component of a Maxi ISA will be reclassified as ‘stocks and shares ISAs’.
Q. Will I have to merge my PEP investments with my stocks and shares ISA investments?
A. No, your existing PEP will just become a stocks and shares ISA and the changes align the rules for the two schemes. You will now be able to invest in the full range of wider qualifying ISA investments.
Q. So from now on how will interest from any un-invested cash held in my former PEP be treated?
A. As the ISA manager INVESTMENT FUNDS DIRECT LIMITED must deduct a flat rate 20 per cent charge and pay it to HM Revenue & Customs. This rule has always applied to stocks and shares ISAs and will now apply to interest earned on uninvested cash formerly held in PEPs.
Q. Can I also transfer the monies I hold in my TOISA to a stocks and shares ISA ?
A. Yes you can. A TOISA is a cash ISA.
Q. Can I transfer the monies I have invested in my stocks and shares ISA to a cash ISA?
A. No. The ISA rules are being changed to allow the transfer of monies saved in a cash ISA to a stocks and shares ISA but not vice versa.
Q. Can I still transfer my cash or stocks and shares ISA held with one provider to another provider?
A. Yes. The rules on transferring like-for-like ISAs between providers are not changing.
Q. Will the qualifying investments of the ISA be changed?
A. No. The qualifying investments rules of the ISA will not change
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