ISA Welcome

The Individual Savings Account (ISA) was introduced by the Government in 1999 as a way for the ordinary person to save money without income or capital gains tax being deducted from their returns. So, if you have any cash savings or a matured TESSA, you could now enjoy tax haven status without moving abroad.

ISAs, now in their second year, also replace PEPs and TESSAs. Although the names of all these investments are quite different, they have a common aim – to give you a long-term, tax-free investment or saving opportunity.

Although PEPs and TESSAs were very successful, a large percentage of the population did not take advantage of these tax efficient savings vehicles when they were available.

The Government introduced this savings account to replace both PEPs and TESSAs. The main aim was to encourage many more people, especially those on lower incomes, to start saving on a regular basis

No further contributions could be made into PEPs from 5^th April 1999, although existing plans continue to remain in existence and enjoy the same tax treatment as ISAs.

Payments can continue to be made into a TESSA until its term ends. Once the TESSA matures, the capital can be invested into a Cash ISA without affecting the normal Cash ISA subscription limit.

Unlike PEPs and TESSAs, ISAs offer three different types of investment:

Cash – where your savings will attract tax-free interest.

Stocks and Shares – invest your money and enjoy the growth potential of the stock market.

Life Insurance – the opportunity to invest in a life insurance contract without paying tax.

ISAs come in 2 ‘sizes’ – Mini and Maxi. You cannot subscribe to both a Mini and a Maxi ISA in any one tax year.

Each year you can take out either one Maxi plan or up to three Mini plans for the three components with different providers.

There are two basic differences between Mini and Maxi plans:

A Maxi plan allows you to contribute the maximum allowance into Stocks and Shares, although this restricts you from investing in Cash or Life Insurance that year.

A Mini plan restricts this to £3,000. However, with a Mini plan you can, in addition to Stocks and Shares, invest in Cash and Life Insurance components with separate providers.

The annual subscription limit is £5,000 of which up to £1,000 can go into Cash and £1,000 into Life Insurance.
However, for the first two years of the scheme – tax years 1999/2000 and 2000/2001 – the annual limit is at the higher rate of £7,000 of which £3,000 can go into Cash and £1,000 into Life Insurance.

Investment Limits for each year	Mini ISA (Up to tax year 2005/6)	Maxi ISA (Up to tax year 2005/6)
Stocks and Shares	£3,000	£7,000
Cash	£3,000	£3,000
Life Insurance	£1,000	£1,000
Overall Limit	£7,000	£7,000

The Government has introduced a set of voluntary standards that are designed to identify a range of straightforward savings products that are simple, clear and fair. Called CAT Standards they relate to:

Charges

Access

Terms

For a product to meet the standards, its charges have to be reasonable (Charges) it has to be easy to invest (Access), and the Terms and Conditions must be straightforward and simple (Terms).

*The fact that a product meets the CAT standards does not mean it is necessarily an appropriate investment for you, nor that there is any guarantee of future investment performance or that it carries approval from the Government. If you are in any doubt as to the suitability of the product you should seek personal financial advice which you may have to pay for.

With Direct Line you can choose to invest in cash, stocks and shares or both.

Direct Line offers:

A Mini Cash ISA

A Mini Stocks and Shares ISA

A Maxi Stocks and Shares ISA

Tell me more about the Cash ISA.
Tell me more about the Stocks and Shares ISA.

The FT-SE 100 Share Index is a registered trademark of the London Stock Exchange and the Financial Times Ltd and is used by FT-SE International Ltd under licence. It does not imply any liability for, or endorsement of the Direct Line FT-SE 100 Tracker ISA.

Direct Line Unit Trusts Limited, 14-18 Cadogan Street, Glasgow, G2 6QN Tel 0845 3000 433 is regulated by the Financial Services Authority. Registered in England No 3088325, Registered Office: 3 Edridge Road, Croydon CR9 1AG. Direct Line Unit Trusts Limited markets only its own products and does not offer advice nor make recommendations about investments. Past performance is not necessarily a guide to the future. The price of units and the income from them may go down as well as up and you may not get back all that you invest. Full terms and conditions are available on request. For your added security, all telephone calls are recorded and the recording kept secure. We may also monitor calls with the aim of improving our service to you. Direct Line and the telephone on wheels are the trademarks of Direct Line Insurance plc and used with its permission.