CAT standards

The introduction of the stakeholder suite of simple, low-cost, risk controlled savings and investment products on 6 April 2005 means that the existing voluntary CAT standard will be discontinued for the marketing and sale of ISA products, the Treasury announced today.

Providers will no longer be able to market ISA products using the CAT standard after 6 April 2005. Existing CAT standard ISA holders will continue to remain on the same terms and conditions after 6 April 2005, without any changes being made to their ISA account. CAT standard mortgages are unaffected by these changes and will continue in their present form.

Welcoming the announcement, Financial Secretary Stephen Timms said:

“The introduction of stakeholder products next year will be a welcome step forward for consumers in improving access to savings and investment products, particularly for those new to the market. To keep access simple and easy it is sensible to have just one standard.

Accordingly, although the CAT standard has been very valuable since it was introduced in 1998, it will be withdrawn for products marketed after 6 April next year.”

The stakeholder product suite available to savers from 6 April 2005 will include three types of savings vehicle to meet various savings needs:

Cash deposit account
Medium term investment product
Revised stakeholder pension

The stakeholder Child Trust Fund will also be available within the suite.

From 6 April providers will be able to offer ISA versions of the stakeholder cash deposit account and the stakeholder medium term investment product.

The stakeholder cash deposit account will be able to give savers a better deal while offering many of the same features as the CAT standard cash ISA. The stakeholder cash deposit account will have to offer an interest rate no less than Bank of England base rate minus 1 per cent (rather than minus 2 per cent under CAT standards), while it could also offer the same tax advantages as the CAT ISA.

The stakeholder medium term investment product will provide risk controls as well as having charges capped at 1.5 per cent AMC for 10 years followed by 1 per cent thereafter.

Notes to editors

1. In his Budget on 17 March 1998, Chancellor of the Exchequer Gordon Brown announced details of the tax breaks which would be available to people who use ISAs.

2. On 1 October 1998 the Treasury announced the introduction of CAT standards for ISAs (HM Treasury PN 159/98). These identified products which offer:

· reasonable Charges
· easy Access
· fair Terms

There is a CAT standard for each kind of ISA: cash, insurance, and stocks and shares.

ISAs were then introduced in April 1999.

3. In January 2000, CAT standards were also introduced for mortgages (HM Treasury PN 7/00). These will remain unaffected by the changes for CAT standard ISAs announced today.

4. As part of the consultation process for stakeholder products that began in February 2003 and finished in November 2004 the issue of CAT standards has been debated with both consumer bodies and industry.

5. Media enquiries should be addressed to Marie-Anne Davies at the Treasury press office on 020 7270 5946

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