Key changes to PEPs and ISAs

1. PEP alignment with ISA

From 6 April 2008, PEPs will cease to exist and will become stocks and shares ISAs. If a client currently holds both an ISA and a PEP with us they will essentially hold two ISA accounts from then on. To help identify which account used to be the PEP the account will be named ‘ISA (formerly PEP)’.

Any former PEP will be treated in the same way as an existing ISA. Interest on uninvested cash held in a former PEP will start to incur a flat rate 20% deduction payable to HM Revenue & Customs (HMRC). Currently tax is payable to HMRC on any cash holding in a PEP if interest in excess of £180 is withdrawn in any one tax year.

Any PEP transfer applications we receive after 5 April 2008 will automatically go into an ISA account and not an ISA (formerly PEP) account. If a client does not hold an existing ISA account with us then one will be opened.

After 6 April, a client who has two ISA accounts with us, will need to quote the individual account numbers on any forms sent to us.

2. Removal of Mini/Maxi ISA distinction

The Mini/Maxi ISA distinction will no longer apply from 6 April 2008. Instead there will be an overall ISA subscription limit of £7,200 for the 2008/09 tax year. Within this overall limit, up to £3,600 can be invested in a cash ISA with one provider. The remainder of the £7,200 limit can be invested in a stocks and shares ISA with either the same or another provider.

3. Cash ISA transfers

If a client holds a cash ISA, from 6 April they will be able to transfer the money into a stocks and shares ISA enabling them to take advantage of the greater growth potential that exists with stock market investments. They can even transfer money saved in the current tax year in a cash ISA to a stocks and shares ISA, provided the whole amount saved in that tax year is transferred. A stocks and shares ISA cannot be transferred into a cash ISA. Skandia does not offer a cash ISA.

Important points regarding administration at tax-year end

• MultiFUNDshop will close at 5pm on 4 April 2008. We are discontinuing this service. Applications for the 2008/09 tax year will not be available on the site.
• On the Selestia Investment Solutions platform, online applications for the 2008/09 tax year will be available from 6 April 2008. To invest in the new tax year ahead of 6 April you should use the paper application form.
• Paper application forms for the new tax year will be available from mid March. For regulatory reasons, we can no longer accept old application forms in the new tax year. Any old applications received will be returned.
• Straddling tax year application forms are now available which will enable you to capture one or two tax years on a simple, tailored ISA form.
• Any ISA or PEP applications created online using Selestia Investment Solutions investment platform but not submitted by 5pm on 4 April 2008 will become obsolete and new applications will need to be created.

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