Managed funds: Savings accounts that last from cradle to the grave

Changes are afoot in the investment world. The Government plans to introduce Individual Savings Accounts (ISAs) in 1999. Notice of this was given by Gordon Brown, Chancellor of the Exchequer, in his Budget in July.

Nothing is known about the likely shape of ISAs, apart from the fact that ministers are on record as saying they will include the best features of PEPs and Tessas.

The Inland Revenue is drawing up proposals on what to include in the new savings scheme. These are expected to be announced before the end of the year.

Ann McMeehan of the Association of Unit Trust and Investment Fund Companies (Autif), the industry trade body, says: "The ideal package will be a flexible vehicle for medium and long- term savings with low charges. It should provide for investment, including equities, and should be a part of sensible pension provision."

The investment industry would like PEPs and Tessas to be transferred into the new ISAs. "We are waiting with bated breath for the details," says Michael Ashbridge, investment director of Save & Prosper. Tony Wood of Virgin Direct adds: "From savings to PEPs and pensions to ISAs should be a smooth transition."

Then there are Oeics, or Open Ended Investment Companies. These were introduced just before the general election to bring the fund investment industry into line with the rest of Europe.

So far just a handful have been launched, the latest being the New Europe Fund from Save & Prosper. This will invest in the new markets in Eastern Europe.

Oeics offer a simplified means of investing in a portfolio of shares, taking some of the best features of unit and investment trusts. The big difference is that they have just one price, which is the same whether buying or selling. The Oeic will be run as a company with a board of directors and can be quoted on the Stock Exchange.

Having invested in the Oeic, there will be a number of sub-funds on offer. These can range from tracker funds to cash funds, from growth or income funds to the more specialist sectors including emerging markets. "The umbrella fund will be able to offer cradle to the grave type funds," says Ms McMeehan. "They will be all-embracing from the lowest to the highest risks. The investor can choose his or her own portfolio of sub-funds which can be rearranged to meet their lifestyle requirements."

- Tony Lyons