Individual Savings Accounts (ISAs) and Personal Equity Plans (PEPs) are tax-efficient savings and investment schemes set up by the government to encourage people to save. They are accounts that protect your investments from income tax and capital gains tax.

PEPs - were available from to 1987 to 1999 and provided a tax-efficient way to invest in equities. You can no longer invest in a PEP, although you can still make changes to your existing PEPs, although from 6th April 2008 PEPs will cease to exist and all PEP accounts will automatically become Stocks & Shares ISAs.

ISAs - were introduced in 1999 as a replacement for PEPs. They provided a tax-efficient way of investing in the stockmarket, cash or insurance and were available to all UK residents over the age of 18. From 6th April 2008 the ISA structure was simplified so that there are now just Cash ISAs and Stocks & Shares ISAs.

In the past PEPs and ISAs have been amongst the most popular ways for people to invest their savings. ISAs continue to be an important investment option due to their tax-efficiency and lower charges.

What types of ISA are there?

There are Cash ISAs and Stocks & Shares ISAs, each offering different investment opportunities.

Cash ISA - you can invest up to £3,600 a year (2008/09) in cash with one provider.

Stocks & Shares ISA - you can invest up to £7,200 a year (2008/09) in stocks and shares with one provider.

Money held in Cash ISA accounts from previous years may be transferred into Stocks & Shares ISA accounts without affecting the annual allowance.

How many ISAs can I have?

In each tax year you can have both a Cash ISA and a Stocks & Shares ISA with an overall total annual (2008/09) allowance of £7,200.