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What&#39s in store for ISAs

The ISA regime is scheduled to start on April 5, 1999. After that date, no new Tessas or Peps can be sold. Here are the current proposals:

Maximum annual investment will be £5,000 and the maximum lifetime total will be £50,000. Investments will be tax-free and can be withdrawn at any time without losing tax privileges.

A maximum of £50,000 can be transferred into an ISA out of existing Peps and maturing Tessas but, once the limit is reached, no more investments are permitted. Pep and Tessa holders will have until October 6, 1999 to transfer to an ISA or lose the tax benefits of their holdings.

There is no minimum investment and no designated providers. The Government wants to encourage supermarkets and stores to offer accounts to give access to the widest range of small investors.

A maximum of £50,000 can be invested in shares and corporate bonds and, unlike Peps, which are restricted to UK and European investments, the shares or bonds can be those from any authorised stockmarket around the world.

Up to £1,000 a year within the £5,000 annual limit can be invested in a cash deposit with a bank or building society, a unit-trust money market fund or any European-authorised savings institution which accepts deposits in the UK.

Up to £1,000 can also be placed in an insurance-linked savings plan taken out after April 1999 but not into a pre-existing policy. The Government will, for the first five years of the ISA regime, give a 10 per cent tax credit on dividend income from UK shares in an ISA.

A prize of £1,000 a month will be paid to 50 randomly selected people with ISAs.

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