Tax-Exempt Special Savings Accounts: Four million find true happiness with Tessa
Here and on pages 20 to 21 we look at a pounds 27bn scheme
Sunday 02 February 1997
As more than 4 million people already know, a Tessa is one of the easiest and simplest tax-savers around, and over the past six years they have attracted a staggering pounds 27bn.
If you were introduced to Tessas back in 1991, when the accounts first began, you could well have seen a total investment of pounds 9,000 build up to around pounds 12,000 with all the interest free of tax. The big attraction of a Tessa is that it is a risk-free tax-saver. This is the key point of distinction between a Tessa and a personal equity plan or Pep.
Tessas are simply a form of savings accoun. Even if stock brokers are leaping out of Wall Street windows, with a Tessa you will always get back at least the money you invested. Keep your money in the account for a full five years and it is entirely tax free, a rule intended to encourage long-term saving.
Peps, on the other hand, are essentially investments in the stock market, either directly, with shares bought through a broker, or through a fund manager such as unit or investment trusts. If stock markets crash, you may not get back all the money you invested, but if they do well, you could make a killing.
Like other savings accounts, a Tessa pays interest, which can be fixed or variable. With a fixed rate, you can work out in advance how your capital will grow over the five-year term, which can be helpful if you are trying to reach a specific target.
On the other hand, if you think that interest rates will generally follow an upward trend for most of the next four or five years, you could opt for a variable rate account, on which the interest will change from time to time in line with savings rates.
Many people are passive investors; many open a Tessa and either pay in a lump sum or set up a direct debit for regular transfers and then forget about it all until the account matures in five years' time.
If, on the other hand, you take a more active interest in managing your finances, you should find out before opening the account what it would cost subsequently to transfer your account to any other provider offering better rates.
Transfers are permissible but often there is a fee if you transfer out of your Tessa before it matures, and this can be anything from pounds 10 to pounds 50, or even more in some circumstances. You may also be required to give up to 60 days' notice if you plan to leave or close your account, and there will probably be no interest paid on your Tessa balance during this period.
Before you try to transfer your Tessa to a new provider, you should check the new bank or building society allows transfers into its Tessas, as many do not.
Most banks and building societies offer at least two types of Tessas, one for first-time savers and the other for those who are looking to reinvest the proceeds from their first Tessa account, and there are different investment limits for each.
£1,430,000,000,000 (that's £1.43 trillion): Britain's personal debt timebomb
Banks are brought to account by switchers as growing number of people expect to be rewarded by their bank
How to start your own internet business
Five ways to make money on the internet
So what difference will the Autumn Statement make to your finances?
- 1 Cameron's freebie to apartheid South Africa
- 2 Is this the scariest advert ever? Japanese tyre commercial comes with its own disclaimer and health warning
- 3 A forgotten episode in Russian history leaves links with the Philippines
- 4 Australian ultra-nationalist politician Stephanie Banister in car crash immigration TV interview
- 5 Nelson Mandela: From 'terrorist' to tea with the Queen
- < Previous
- Next >
iJobs Money & Business
£150 - £250 per day: Cornwallis Elt : iPhone Rollout- Blackberry Enginee...
£55000 - £70000 per annum: Pro-Recruitment Group: A well-known and renowned in...
£450 - £500 per hour: Cornwallis Elt : Business Analyst Finance System Hy...
£400 - £550 per day: Cornwallis Elt : BUSINESS ANALYST- OPERATIONS- PRIVATE B...
Day In a Page
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew
A two-bedroom maisonette set on the top two floors of a period building, close to Kentish Town Tube.
Take advantage of the extra space provided by former stables and outbuildings at this five-bedroom farmhouse.
This three-bedroom Victorian terrace is near to Queen’s Road Peckham station, Nunhead station.
A five-bedroom modern house with terrace, swimming pool, Zen treehouse and large carp pond
An unexpected gem with four bedrooms, remarkable vaulted reception and a galleried study area
A five-bedroom house in one of Lymington's most sought after tree lined avenues, moments from the marinas and sailing clubs
A grand early 19th century B&B close to the historic harbour, with four en suite bedrooms
A four-bedroom, 17th century home with walled gardens, a landscaped terrace, cellar and open fires
A six-bedroom house with five bathrooms and four reception rooms spread over 4,000sq ft of luxury living space
A stunning three double-bedroom apartment with two decked terraces in the exclusive gated community, Bromyard House
A 10-bedroom period, family home amid beautiful surroundings in the centre of the Wentworth Estate in Longcross village
A stylish three-bedroom apartment with two bathrooms and private landscaped garden, moments from Fitzroy Square
A Grade II-listed Elizabethan barn with landscaped gardens, exposed elm beams and four bedrooms, all with lovely views
A six-bedroom family home, dating back to 1280 with four reception rooms, barn, swimming pool and tennis courts in Harwell
A spacious two-bedroom flat, refurbished to a very high standard with private landscaped garden, close to Kentish Town station
An exceptional two-bedroom apartment with balcony and underground parking in the centre of Richmond
A one-bedroom, luxury, duplex apartment in the grand landmark building, Imperial Hall
Run a fabulous boutique shop, live above it in a one-bedroom flat and let a second one-bedroom flat that comes part and parcel
A Grade-II listed, thatched cottage in Hundleby village, with five bedrooms, a coach house and three and a half acres
A spacious two-bedroom flat in the heart of Hoxton Square with wooden floors and roof terrace
A five-bedroom family home with stunning pool and gym complex set among two acres of land
A six-bedroom period house with heated swimming pool and a separate two-bedroom annexe cottage in Townlake, £795,000
A spacious and contemporary two-bedroom flat arranged over three floors, with garden patio close to St George Square, £600,000
A one-bedroom flat in a beautiful Regency building opposite the beach in Kemp Town, £190,000
A two-bedroom flat with London skyline views close to Surrey Quays. £395,000.
A seven-storey tower with three bedrooms and a stunning roof terrace. Guide price: £850,000.
A 16-bedroom country pile with nine reception rooms, four self-contained flats and a 13th century Peel Tower. £850,000.
A classic six-bedroom Victorian Manse house 10 miles from Edinburgh. £495,000.
John Lennon's childhood home in Liverpool to be sold at auction. Guide price: £150,000-£250,000.
A six-bedroom detached period property with secluded gardens, ample parking and a double garage in Rye, £675,000.
A large split-level property with three double-bedrooms and roof terrace, close to Crouch End Broadway, £625,000.
A charming barn conversion in the picturesque Cotswold village of Ilmington with three bedrooms, a detached garage, workshop and beautifully manicured gardens £675,000.
A three-bedroom new build, ground-floor flat with two bathrooms, close to Bermondsey tube, £445,000.
A three-bedroom house in an enviable new development moments from Oxshott High Street, with secluded garden and decked area, £385,000
A two-bedroom split-level flat with stunning south-west facing roof terrace in the popular Brondesbury Conservation Area, £549,950.
A charming 16th century, three-bedroom detached house in Bidborough with picturesque garden