Money: Be warned: ISAs are not as simple as we've been told
Sunday 14 March 1999
As someone who saves each month into a PEP, I only have until 17 March to sign up for an individual savings account to start in April.
Everyone with an existing PEP has probably received a similar letter. But I won't be signing up. There is a loophole in the ISA regulations that most customers don't know about - and some managers aren't bothering to highlight.
If you don't intend to save the full pounds 7,000 allowance in a stocks and shares ISA - a PEP by another name - then you could lose the chance to make thousands of pounds-worth of tax-free savings.
My manager - Norwich Union - is asking customers to sign up to a Maxi ISA which only invests in stocks and shares. A Maxi ISA commits you to one manager for all of your ISA investments for the whole tax year.
Many of us will be looking to save some money in a stock market fund, but also want to take advantage of the new chance to save cash in a tax- free savings account.
By signing up for a stocks and shares Maxi ISA we have blown the opportunity to save up to pounds 3,000 in an ordinary savings account.
Some of the big-name fund managers have got round this problem and they are offering a range of ISA options to customers. Fidelity, Jupiter, Legal & General and M&G are some of those which sensibly allow you to open a Maxi ISA that can combine a savings account with investment in the stock market. You could put, say, pounds 5,000, into the stock market, and still hold pounds 2,000 in a savings account.
Firms that have chosen not to offer this combined ISA service include Perpetual, Schroders and Newton.
A second loophole affects people signing up for the stocks and shares Mini ISA, which allows you to pick a separate bank or building society for your cash Mini ISA (so you can hunt for the best interest rates). If you sign for a stocks and shares Mini ISA you will lose pounds 1,000 of your overall ISA allowance.
Why? Both sorts of Mini ISAs have an overall limit of pounds 3,000 each next year. In a single Maxi ISA you can save pounds 4,000 in shares and still stick pounds 3,000 into a savings account.
The ISA scheme was intended to be simple and to get more people into saving. But it's hard to see how the current rules will encourage anything other than complaints and confusion.
- 1 Woman accidentally shoots herself in the head while posing for a selfie
- 2 Art Garfunkel: Paul Simon is a 'monster' with a Napoleon complex
- 3 Isis burns woman alive for refusing to engage in 'extreme' sex act, UN says
- 4 Female Muay Thai champion hustles coaches to give them a beating
- 5 Puerto Rico, island of lost dreams: People are leaving the debt-hit territory in droves as near neighbour Cuba's star rises
Isis 'jihadi bride' claims forced sex with Yazidi girls is never rape because Koran condones it
Woman accidentally shoots herself in the head while posing for a selfie
Isis burns woman alive for refusing to engage in 'extreme' sex act, UN says
Puerto Rico, island of lost dreams: People are leaving the debt-hit territory in droves as near neighbour Cuba's star rises
16-year-old girl beaten and burned alive by lynch mob in Rio Bravo, Guatemala
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
The day that Britain resigned as a global power
Almost a third of school pupils believe 'Muslims are taking over our country', study claims
SNP fury as HS2 finds 'no business case' for taking fast train service to Scotland
Gay marriage 'Bert and Ernie' cake bakery found guilty of discrimination in Northern Ireland
iJobs Money & Business
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...
£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...
£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...