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Treasury 9

25 November 1997

HMT 9: A savings account for the many, not just the few

Government proposals for a new, instant-access, tax-free savings account were launched today.

Individual Savings Accounts (ISAs) will give everyone the opportunity to save for a more secure future. ISAs will have no minimum level of saving and no requirement to lock money away for a long period of time.

Paymaster General Geoffrey Robinson said:

"Saving for the future is both prudent and sensible, but over half the adult population of our country hardly save at all.

"I am determined that Britain should have a tax system for savings which benefits the many and not just the few.

"The new Individual Savings Account will suit any investor, no matter how large or small. Designed for easy access from banks, building societies and new outlets such as supermarkets, ISAs will enable people to put all forms of savings - cash, stocks, shares, life insurance and National Savings - in a tax-free 'one-stop' account."

Notes to editors

1. TESSAs were introduced on 1 January 1991. They are special accounts - usually with bank or building societies - in which savers aged 18 or over can invest up to 9000 Pounds over 5 years, subject to annual limits. Interest is tax free. There are about 4½ million TESSA savers and the tax relief is estimated to cost 450 million Pounds in 1997/98.
2. PEPs were introduced on 1 January 1987. Savers may subscribe up to 6000 Pounds to a general PEP which invests in certain shares and securities, and in authorised unit and investment trusts and open ended investment companies which meet certain investment criteria. In addition, savers may subscribe up to 3,000 Pounds to a single company PEP investing in the shares of one company. Income and capital gains are tax free. There are over 3 million PEP savers and the tax relief is estimated to cost over 800 million Pounds in 1997/98.
3. The consultative document The New Individual Savings Account provides further details of the Government's proposals. Free copies can be obtained from:
   
   Inland Revenue Information Centre
   South West Wing
   Bush House
   Strand
   London
   WC2B 4RD
   
4. Copies are also available to personal callers between 9.00am and 5.00pm weekdays from the same address. Copies can also be ordered by phone on 0171 438 6420/1/2/3/4/5.
5. The consultative document is also available on the Internet at: http://www.hmrc.gov.uk/consult/
6. Comments on the proposals should be sent no later than the end of January 1998 to:
   
   Keith Brown
   Inland Revenue
   Room 234 South West Wing
   Bush House
   Strand
   London
   WC2B 4RD
   
   Inland Revenue press office
   Press enquiries to: 0207 438 6692/6706/7327
   Non-media enquiries to: 0207 438 6420/6425 (Out of hours: 0860 359544)

Individual savings account - main proposals

The main features are:

There is no minimum level of saving, and no requirement to lock money away for a long period.

ISAs can include cash, stocks and shares, life insurance and National savings in a 'one-stop' account.

Up to £5,000 a year per person can be invested in ISAs, of which no more that £1,000 may be in cash and £1,000 in life insurance, and subject to a total limit of £50,000.

People with TESSAs will be able to put the capital from their TESSA into the ISA, within the overall limit of £50,000, when the TESSA matures.

PEP investors will be able to keep the benefit of their tax free saving with their existing managers by switching their PEP investment into the ISA within the overall limit of £50,000.

ISAs will be available to anyone over 18 and who is resident in the UK for tax purposes.

ISAs will be completely free of tax - no income tax or capital gains tax to pay on investments in the account, as with TESSAs and PEPs. In addition, a 10 per cent tax credit will be paid on dividends from UK shares in the ISA for the first five years of the scheme. People can take money out at any time without losing any of these benefits.

ISAs will be run by an ISA manager. They can be marketed either by a financial institution offering different accounts using the range of savings - cash, stocks and shares, life insurance and National Savings - or by an independent person offering other people's products.

ISAs will be as accessible as possible. It could be run through the traditional savings channels - banks, building societies and investment houses. But also through new ways, for example at supermarket checkouts and with swipe cards.

People will be able to have one ISA each year. This means they can have a different manager each year. And they will be able to change managers who run their ISAs.

There will be a prize draw each month. 50 people with an ISA will be selected at random, and will have £1,000 added to their ISA.

Pre Budget 1997 Press Notices index page

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