ISA Frequently Asked Questions

<BODY BGCOLOR="#FFFFCC" LEFTMARGIN="20" TOPMARGIN="20" MARGINWIDTH="20" MARGINHEIGHT="20" TEXT="#000000" LINK="#000080" VLINK="#000080" ALINK="#0000FF"> <P ALIGN="CENTER"><FONT FACE="Arial"><B>ISA Frequently Asked Questions</B></FONT></P> <TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER"> <TR> <TD> <OL> <LI><A HREF="#what_is_an_isa"><FONT FACE="Arial" SIZE="-1">What is an ISA?</FONT></A></LI> <LI><A HREF="#can_anyone_have_an_isa"><FONT FACE="Arial" SIZE="-1">Can anyone have an ISA?</FONT></A></LI> <LI><A HREF="#what_is_so_special_about_an_isa"><FONT FACE="Arial" SIZE="-1">What is so special about an ISA?</FONT></A></LI> <LI><A HREF="#what_about_isas_and_tax"><FONT FACE="Arial" SIZE="-1">What about ISAs and Tax?</FONT></A></LI> <LI><A HREF="#maxi_mini"><FONT FACE="Arial" SIZE="-1">What is the difference between MAXI and MINI ISAs?</FONT></A></LI> <LI><A HREF="#the_three_types"><FONT FACE="Arial" SIZE="-1">What are the three different types of Investments that can be held within an ISA?</FONT></A></LI> <LI><A HREF="#what_not_allowed"><FONT FACE="Arial" SIZE="-1">What can an ISA not invest in?</FONT></A></LI> <LI><A HREF="#for_a_mortgage"><FONT FACE="Arial" SIZE="-1">Is it possible to use an ISA to pay off a mortgage?</FONT></A></LI> <LI><A HREF="#other_tax_good_invest"><FONT FACE="Arial" SIZE="-1">Apart from ISAs what other Tax-efficient investments are there?</FONT></A></LI> <LI><A HREF="#cat_standards"><FONT FACE="Arial" SIZE="-1">What are the CAT standards?</FONT></A></LI> <LI><A HREF="#and_peps_tessas"><FONT FACE="Arial" SIZE="-1">What happens to PEPs and TESSAs?</FONT></A></LI> <LI><A HREF="#transfer_pep"><FONT FACE="Arial" SIZE="-1">Should an investor transfer his/her PEP into an ISA?</FONT></A></LI> </OL></TD> </TR> </TABLE> <DL> <DT><FONT FACE="Arial" SIZE="-1"><B><A NAME="what_is_an_isa">What is an ISA?</A></B></FONT></DT> <DD> <P><FONT FACE="Arial" SIZE="-1">It is an Individual Savings Account. It is a new type of tax efficient savings plan that will allow individuals to invest in a number of different ways  Cash (including National Savings), Life Insurance, and Equity Investments (Unit Trusts, OEICS, Investment Trusts, Shares etc.) </FONT></P></DD> <DT><FONT FACE="Arial" SIZE="-1"><B><A NAME="can_anyone_have_an_isa">Can anyone have an ISA?</A></B></FONT></DT> <DD> <P><FONT FACE="Arial" SIZE="-1">ISAs are available to individuals aged 18 or over who are resident and ordinarily resident in the UK for tax purposes. All ISAs must be held individually. You cannot have a joint ISA. </FONT></P></DD> <DT><FONT FACE="Arial" SIZE="-1"><B><A NAME="what_is_so_special_about_an_isa">What is so special about an ISA?</A></B> </FONT></DT> <DD> <P><FONT FACE="Arial" SIZE="-1"> Some have no minimum investment. An individual does not have to tie up money for a long term. They are tax-free. There is no lifetime limit. </FONT></P></DD> <DT><FONT FACE="Arial" SIZE="-1"><B><A NAME="what_about_ISAs_and_tax">What about ISAs and Tax?</A></B> </FONT></DT> <DD> <P><FONT FACE="Arial" SIZE="-1">An ISA is simply a tax efficient way of saving and investing your money. This can be done in a number of different ways to suit your personal needs. For example, you could choose a savings account with no notice or penalty, a stock market investment or a combination of the two.</FONT></P> <P><FONT FACE="Arial" SIZE="-1">ISAs are free from all UK Income Tax and Capital Gains Tax, and they could be the best way of helping your money to grow tax free. There is a limit to how much you can invest in an ISA in each tax year, but once you have one, you can hold on to it and enjoy its tax free benefits. </FONT></P></DD> <DT><FONT FACE="Arial" SIZE="-1"><B><A NAME="maxi_mini">What is the difference between MAXI and MINI ISAs?</A></B></FONT></DT> <DD> <P><FONT FACE="Arial" SIZE="-1">The MAXI ISA can hold all the three different type of investments that are allowed  Cash, Life Assurance and Equity type investments. One Company on behalf of the investor manages the savings. The MINI ISA has three different managers for each different part. </FONT></P></DD> <DT><FONT FACE="Arial" SIZE="-1"><B><A NAME="the_three_types">What are the three different types of Investments that can be held within an ISA?</A></B></FONT></DT> <DD> <P><FONT FACE="Arial" SIZE="-1">They are:</FONT></P> <P><FONT FACE="Arial" SIZE="-1"><B>Equity ISAs</B>  which can invest in Unit Trusts, OEICS, Investment Trusts and Corporate Bonds. Shares received from an approved profit sharing or savings-related share option scheme (SAYE) may be transferred into the ISA at market value. This will count towards an investors annual limit but will not incur Capital Gains Tax on the transfer. </FONT></P> <P><FONT FACE="Arial" SIZE="-1"><B>Cash accounts</B> - Cash can be Bank and building society accounts, Unit Trusts or OEICS investing in money market. National savings products, which are not tax-free and often overlooked, are deposits with Credit Unions.</FONT></P> <P><FONT FACE="Arial" SIZE="-1"><B>Life Insurance</B>  policies issued by Insurance Companies, the minimum premium must be £25 per month or £250 per annum.</FONT></P></DD> <DT><FONT FACE="Arial" SIZE="-1"><B><A NAME="what_not_allowed">What can an ISA not invest in?</A></B></FONT></DT> <DD> <P><FONT FACE="Arial" SIZE="-1"> Like PEPs, ISAs will not invest in unlisted shares or shares quoted on the Alternative Investment Market (AIM). This is because the shares may have already benefited from tax reliefs. Shares from a public offer (privatisation) or from a demutualising Building Society or Insurer may not be transferred into an ISA. </FONT></P></DD> <DT><FONT FACE="Arial" SIZE="-1"><B><A NAME="for_a_mortgage">Is it possible to use an ISA to pay off a mortgage? </A></B></FONT></DT> <DD> <P><FONT FACE="Arial" SIZE="-1">Over the first 10 years of an ISA  the minimum term that the government has indicated that ISAs will run for, it is possible to pay contributions of £52,000. Over 25 years some commentators have suggested that this would cover a mortgage of approximately £125,000. </FONT></P> <P><FONT FACE="Arial" SIZE="-1">Of course, a couple could theoretically cover a mortgage of £250,000 provided both invested the maximum possible in their ISAs. Remember though that ISAs are not guaranteed and Life Cover and Critical Illness Cover would be required. </FONT></P></DD> <DT><FONT FACE="Arial" SIZE="-1"><B><A NAME="other_tax_good_invest">Apart from ISAs what other Tax-efficient investments are there? </A></B></FONT></DT> <DD> <P><FONT FACE="Arial" SIZE="-1"><B> National Savings Certificates</B><BR> These may be an attractive option for higher rate taxpayers. An individual may invest up to £10000 with the Government and receive a tax-free income.</FONT></P> <P><FONT FACE="Arial" SIZE="-1"><B>Venture Capital Trusts</B><BR>Also known as VCTs. These may also be of interest for some Wealthier Investors. These were introduced in the 1995 Finance Act.</FONT></P> <P><FONT FACE="Arial" SIZE="-1">Investors are exempt from all income tax on dividends received from VCTs as well as Capital Gains Tax on the disposal of shares. This is similar to the tax position on ISAs. </FONT></P> <P><FONT FACE="Arial" SIZE="-1">Another benefit of VCTs is that subscribers for new ordinary shares in VCTs can claim income tax relief at the rate of 20%, in the year of issue of the shares, as long as the shares are held for 5 years. </FONT></P> <P><FONT FACE="Arial" SIZE="-1">In addition to this, an individual subscribing for new ordinary shares in VCTs are also able to defer a capital gain up to the amount subscribed. The maximum an individual can invest in a VCT in a Tax Year is £100,000. An individual investing in a VCT should consult with an IFA who has experience in this area.</FONT></P> <P><FONT FACE="Arial" SIZE="-1"><B> Friendly Society Plans.</B><BR> These are tax-free regular savings plans, which had an original maximum monthly premium of £9. This has been steadily increased in successive budgets to its current level of £25pm. The minimum term is usually for 10 years and as long as the premiums are paid for this length of time the proceeds are tax-free. With funds investing directly in shares and funds, which smooth returns (With Profits), Friendly Society Plans are of interest to many investors.</FONT></P> <P><FONT FACE="Arial" SIZE="-1"><B> Pensions</B><BR>With tax relief on contributions and the fund able to grow tax-free, one of the most established forms of saving continues and is attractive to all investors.</FONT></P> <P><FONT FACE="Arial" SIZE="-1">For all of the above it is essential that an individual seeks Independent Financial Advice</FONT></P></DD> <DT><FONT FACE="Arial" SIZE="-1"><B><A NAME="cat_standards">What are the CAT standards?</A></B></FONT></DT> <DD> <P><FONT FACE="Arial" SIZE="-1">The CAT standards are a set of voluntary standards drawn up by the Treasury (Government) which companies can choose to adopt for their ISAs. CAT stands for Charges, Access and Terms. The rationale of the CAT standard is to help inexperienced consumers recognise worthwhile products as well as encouraging competition in the market for small savers. </FONT></P> <P><FONT FACE="Arial" SIZE="-1">An ISA that meets or betters the standards will be awarded a CAT mark, which it can use in advertising or brochures.</FONT></P> <P><FONT FACE="Arial" SIZE="-1">However, CAT standards are not applied to the investment performance of a stockmarket-based ISA.</FONT></P> <P><FONT FACE="Arial" SIZE="-1">It is impossible to grade potential performance, therefore a CAT mark is not a Kite Mark, it does not guarantee that a Stockmarket ISA will perform well or even that it will not lose money. An investment in a CAT marked ISA can go down as well as up and is not guaranteed. </FONT></P> <P><FONT FACE="Arial" SIZE="-1">CAT marks will represent certain standards for each category of investment. </FONT></P> <P><FONT FACE="Arial" SIZE="-1">These are: </FONT></P> <OL> <LI><FONT FACE="Arial"><B>Cash ISA </B></FONT> <UL> <LI><FONT FACE="Arial" SIZE="-1"><B>Charges</B></FONT> <UL> <LI><FONT FACE="Arial" SIZE="-1">no charges at all</FONT></LI> </UL></LI> <LI><FONT FACE="Arial" SIZE="-1"><B>Access</B></FONT> <UL> <LI><FONT FACE="Arial" SIZE="-1">a minimum deposit/withdrawal no greater than £10, withdrawals must be allowed within 7 working days or less</FONT></LI> </UL></LI> <LI><FONT FACE="Arial" SIZE="-1"><B>Terms</B></FONT> <UL> <LI><FONT FACE="Arial" SIZE="-1">interest rate no lower than 2% points below base rate, must follow base rate increase within one calendar month.</FONT></LI> </UL></LI> </UL><BR></LI> <LI><FONT FACE="Arial"><B>Insurance ISA </B></FONT> <UL> <LI><FONT FACE="Arial" SIZE="-1"><B>Charge</B></FONT> <UL> <LI><FONT FACE="Arial" SIZE="-1">annual charge no more than 3%, no other charges</FONT></LI> </UL></LI> <LI><FONT FACE="Arial" SIZE="-1"><B>Access</B></FONT> <UL> <LI><FONT FACE="Arial" SIZE="-1">minimum premium no greater than £25 per month or £250 per annum. </FONT></LI> </UL></LI> <LI><FONT FACE="Arial" SIZE="-1"><B>Terms</B></FONT> <UL> <LI><FONT FACE="Arial" SIZE="-1">surrender value must reflect the value of the underlying assets and be at least equal to premiums paid after 3 years</FONT></LI> </UL></LI> </UL><BR></LI> <LI><FONT FACE="Arial"><B>Stockmarket ISA </B></FONT> <UL> <LI><FONT FACE="Arial" SIZE="-1"><B>Charge</B></FONT> <UL> <LI><FONT FACE="Arial" SIZE="-1">annual charge of no more than 1% of net asset value, no other charges</FONT></LI> </UL></LI> <LI><FONT FACE="Arial" SIZE="-1"><B>Access</B></FONT> <UL> <LI><FONT FACE="Arial" SIZE="-1">minimum savings of no more than £50 per month or £500 per year. </FONT></LI> </UL></LI> <LI><FONT FACE="Arial" SIZE="-1"><B>Terms</B></FONT> <UL> <LI><FONT FACE="Arial" SIZE="-1">can invest in shares, authorised unit trusts, OEICS or certain investment trusts(e.g. not split capital trusts), units and shares must be single priced at mid market price.</FONT></LI> </UL></LI> </UL><BR></LI> <LI><FONT FACE="Arial"><B> All ISA providers</B></FONT> <UL> <LI><FONT FACE="Arial" SIZE="-1"><B>Terms</B></FONT> <UL> <LI><FONT FACE="Arial" SIZE="-1">no requirement to buy another linked product, undertaking to keep to the CAT standard after the investment is started, use of plain English, no limitation of ISA investments to existing customers, Fair and straightforward treatment of customers. </FONT></LI> </UL></LI> </UL></LI> </OL> <BR></DD> <DT><FONT FACE="Arial" SIZE="-1"><B><A NAME="and_peps_tessas"> What happens to PEPs and TESSAs? </A></B></FONT></DT> <DD> <P><FONT FACE="Arial" SIZE="-1"><B>PEPs </B><BR>An investor is allowed to keep all existing PEPs as long as they want to. However, no further contributions can be paid into a PEP after 5/4/99. All contributions previous to this date can remain invested, and all profits are free of tax.</FONT></P> <P><FONT FACE="Arial" SIZE="-1"><B>TESSAs</B><BR>A saver can continue to pay into a TESSA until the end of the original 5-year term. As detailed in the TESSA pages, as long as the capital remains untouched, the interest will be paid out free of tax on maturity. When the TESSA matures, a saver can take the capital and reinvest it (but not the interest). </FONT></P> <P><FONT FACE="Arial" SIZE="-1">This could be either in a special extra TESSA only ISA which does not affect the other ISA limits for that year or investment can be made into the Cash element which is £3000 (1999/2000) or £1000 from 2000/2001 onwards. </FONT></P></DD> <DT><FONT FACE="Arial" SIZE="-1"><B><A NAME="transfer_pep"> Should an investor transfer his/her PEP into an ISA? </A></B></FONT></DT> <DD> <P><FONT FACE="Arial" SIZE="-1">It seems unlikely that an investor would wish to do so. As a PEP can be continued without affecting the amount that can be invested in an ISA, a reason for doing so could be to consolidate investments with one provider.</FONT></P> <P><FONT FACE="Arial" SIZE="-1">However, it should be remembered that PEP investments could be transferred to other funds with the same provider and/or transferred to other providers. An individual wondering what to do with their ISAs and/or PEPS should seek advice from an IFA. </FONT></P></DD> </DL> <P ALIGN="CENTER"><B><FONT FACE="Arial" SIZE="-1">Please <A HREF="contact_us.html">contact us</A> for further information,<BR>or submit your <A HREF="enquiry_form.html">enquiry</A></FONT></B></P> <TABLE WIDTH="410" BORDER="0" CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER"> <TR VALIGN="MIDDLE"> <TD VALIGN="MIDDLE" ALIGN="CENTER"><IMG SRC="Contact_artwork/phone.gif" WIDTH="59" HEIGHT="58" BORDER="0" ALT="+44 (0)2920-736000"></TD> <TD VALIGN="MIDDLE" ALIGN="CENTER"><A HREF="registration_form.html"><IMG SRC="register-anim.gif" ALT="Register With Us" WIDTH="143" HEIGHT="28" BORDER="0"></A></TD> <TD VALIGN="MIDDLE" ALIGN="CENTER"><IMG SRC="Contact_artwork/fax.gif" WIDTH="71" HEIGHT="56" BORDER="0" ALT="+44 (0)2920-736222"></TD> </TR> <TR VALIGN="MIDDLE"> <TD VALIGN="MIDDLE" ALIGN="CENTER"><FONT FACE="Arial" SIZE="-1"><B>+44 (0)2920-736000</B></FONT></TD> <TD VALIGN="MIDDLE" ALIGN="CENTER"></TD> <TD VALIGN="MIDDLE" ALIGN="CENTER"><FONT FACE="Arial" SIZE="-1"><B>+44 (0)2920-736222</B></FONT></TD> </TR> </TABLE><BR> <TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER"> <TR> <TD VALIGN="MIDDLE" ALIGN="CENTER"> <P><B><FONT FACE="Arial" SIZE="-1">| <A HREF="home.html">Home</A> | <A HREF="site_map.html" TARGET="_top">Site Map</A> | <A HREF="menu-help_and_tools.html">Help & Tools</A> | <A HREF="contact_us.html">Contact Us</A> | <A HREF="frameset-login.html" TARGET="_top">Login</A> |<BR>| <A HREF="menu_corporate.html">Corporate Services</A> | <A HREF="individual.html">Individual Services</A> | <A HREF="frameset-menu-special_services2.html" TARGET="_top">Special Services</A> |</FONT></B></P></TD> </TR> <TR> <TD VALIGN="MIDDLE" ALIGN="CENTER"><HR></TD> </TR> <TR> <TD VALIGN="MIDDLE" ALIGN="CENTER"> <P><B><FONT FACE="Arial" SIZE="-2">| <A HREF="employee_benefits_survey.html">Employee Benefits Survey</A> | <A HREF="enquiry_form.html">Enquiry Form</A> | <A HREF="mailing_list.html">Mailing List</A> | <A HREF="feedback_form.html">Feedback Form</A> | <A HREF="mailto:michelle@grosvenor-butterworth.co.uk">Email Us</A> |</FONT></B></P></TD> </TR> </TABLE><BR> <P ALIGN="CENTER"><FONT FACE="Arial" SIZE="-2">Grosvenor Butterworth is regulated by the Financial Services Authority</FONT><A HREF="copyright.html"><FONT FACE="Arial" SIZE="-2"><BR>© 1997-2000 Grosvenor Butterworth All Rights Reserved<BR> | Legal Disclaimer |</FONT></A></P> <P ALIGN="CENTER"><A HREF="http://www.saqnet.co.uk/scripts/hitcount11a.dll?hide:grosb"><IMG SRC="spacer.gif" WIDTH="200" HEIGHT="50" BORDER="0"></A></P> <TABLE BORDER="0" CELLPADDING="0" CELLSPACING="0" ALIGN="center" width="80%"> <TR> <TD>  <SCRIPT TYPE="text/javascript" LANGUAGE="javascript"> s="na";c="na";j="na";f=""+escape(document.referrer) </SCRIPT> <SCRIPT TYPE="text/javascript" LANGUAGE="javascript1.2"> s=screen.width;v=navigator.appName if (v != "Netscape") {c=screen.colorDepth} else {c=screen.pixelDepth} j=navigator.javaEnabled() </SCRIPT> <SCRIPT TYPE="text/javascript" LANGUAGE="javascript"> function pr(n) {document.write(n,"\n");} NS2Ch=0 if (navigator.appName == "Netscape" && navigator.appVersion.charAt(0) == "2") {NS2Ch=1} if (NS2Ch == 0) { r="&size="+s+"&colors="+c+"&referer="+f+"&java="+j+"" pr("<A HREF=\"http://www.TheCounter.com\" TARGET=\"_top\"> " BORDER=0 SRC=\"http://c1.thecounter.com/id=814925"+r+"\" align=left><\/A>")} </SCRIPT> <NOSCRIPT><A HREF="http://www.TheCounter.com" TARGET="_top"><IMG SRC="http://c1.thecounter.com/id=814925" ALT="TC" BORDER=0></A> </NOSCRIPT>  </TD> <TD> <div align="left"><IMG SRC="spacer.gif" WIDTH="8" HEIGHT="1" BORDER="0"> </div> <p align="right"><img src="http://www.saqnet.co.uk/scripts/hitcount11a.dll?hide:grosb" border="0" width="1" height="1"><a href="http://www.dynamicwebs.co.uk/" target="_top"><img src="dw_button.gif" alt="Designed by Dynamic Webs..." width="77" height="34" border="0"></a> <p align="RIGHT"> </TD> </TR> </TABLE> </BODY>