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ISA limit raised to £7,000 in first year

The main features of the Individual Savings Account announced by the Chancellor are:

Everyone will have the same chance to subscribe to the ISA, irrespective of the current value of their Pep and Tessa holdings.

The ISA will start on April 6, 1999 and be guaranteed to run for at least 10 years.

The annual subscription limit will be £5,000, of which no more than £1,000 can go into cash and £1,000 into life insurance.

However, in the first year of the scheme only (1999/2000), the annual limit will be £7,000, of which no more than £3,000 can go into cash and £1,000 into life insurance. The ISA can comprise cash, including National Savings, life insurance and stocks and shares.

The account will be completely free of tax and there will be no statutory lock-in or minimum subscription.

There is no lifetime limit.

Pep subscriptions can be made until April 5, 1999. All Peps held at April 6, 1999 can continue to be held as Peps outside the new savings account but with the same tax advantages as the new account.

Savers will be able to open Tessas until April 5, 1999 and pay into them under existing rules for their five-year life.

Capital from maturing Tessas can be transferred into the cash component of the new savings account.

Neither annual subscriptions to Tessas nor any maturing capital will count against the annual subscription limit for the new account.

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