But the propaganda about not missing the PEP boat ignores one vitally important point: on 6 April, it will still be possible to buy a tax-free savings product, the Individual Savings Account (ISA).
In fact, in the coming tax year it will be possible to stash away pounds 7,000 (more than the pounds 6,000 allowed in a PEP) into a general ISA. The downside is that ISAs are inherently more complicated. So what are the rules?
For a start, the age and residency requirements of a PEP apply to an ISA, too. But they also come in three different guises, maxi, mini and Tessa-only. Investors will be allowed to set up their own variant almost at will. The investment limit into maxi-ISA can be up to pounds 5,000pa (pounds 7,000 in 1999/ 2000). It must contain a stocks and shares component, which includes unit and investment trusts, shares, corporate bonds and gilts. But the maxi can also include a cash component (bank/building society accounts, National Savings) and/or life assurance. Alternatively, you can set up mini-ISAs, into which either pounds 3,000 can go into stocks and shares, pounds 1,000 into insurance products or pounds 1,000 into cash (pounds 3,000 in 1999/2000). Tessas will be scrapped, although you can still invest in one opened before 5 April. At maturity, and for six months afterwards, the capital value can be poured into a cash ISA.
Investors who are being exhorted to pile into PEPs now should pause for thought. So you lose a year's worth of tax benefits. But what goes around comes around - and in this case it will be back in a different wrapper the day after PEPs are withdrawn.Reuse content