Individual Savings Account

A Individual Savings Account (ISA) is a financial product available in the UK, designed for the purpose of tax-free savings. ISAs were introduced on April 6, 1999, replacing the earlier PEPs[?] and TESSAs[?] - they were explicitly designed to appeal to a broader range of the population than these earlier products, which were sometimes claimed to be exclusively for the benefit of the middle class. Individuals can put up to £3000 into an ISA in the financial year in which it is opened, and a further £1000 each financial year thereafter, without having to pay tax on the interest. There are three types of ISAs:

• Cash ISAs - apart from the tax-free status, these are similar to ordinary savings accounts
• Stocks and Shares ISAs - in these, the money is invested in the stock market (therefore, a more risky investment)
• Insurance ISAs - these have an additional element of insurance

There are also mixed ISAs, where the money is split between two or all of these categories.

In April 1999[?] the Government introduced a voluntary CAT (for "Charges, Access, and Terms") standard for ISAs, to make them easier for inexperienced customers to understand, and harder to mis-sell. It does not guarantee the investment performance. Many products now comply with this standard.

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