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March 29, 2001

The 6th April will see many of the PEP and ISA improvements that PIMA has been calling for finally come into effect.

Through its members, PIMA has become aware that there is some confusion among consumers as to what the implications of the changes are, so the Association is advising savers taking out new subscriptions to check the rules with their chosen provider or an IFA to avoid falling foul of the regulations.

To help consumers understand what the changes mean for them, PIMA is publicising the attached summary which can also be freely accessed by consumers at www.pima.co.uk

Peter Shipp, Chief Executive, PIMA, said: “It’s fantastic finally to see so many of the changes we’ve been pushing for come into force. It’s ultimately all good news for savers, but it’s important to ensure that consumers understand the implications of these changes.

“Anyone who is unsure about what the changes mean for them should make sure they talk to their ISA provider or an independent financial adviser, to help ensure they don’t break the rules. Some 85,000 subscriptions may have fallen foul of the regulations in the first year of ISAs – this number, whilst lower than we had feared, needs to be reduced in the future.”


PIMA’s summary of rule changes and implications:

ISAs –
– The £7000 ISA subscription limit will now run until April 2006. This brings a welcome stability, and benefits those saving seriously for their future – for example: those with ISA mortgages

– 16 and 17 year olds can now subscribe to a cash ISA. This can be either a mini or the cash component of a maxi.

PEPs –
Approximately 6 million investors with around £80 billion in their PEPs will benefit from the opening up and simplification of the PEP investment rules to match ISAs:

– The restriction on direct share holdings, limiting them to European shares, is removed so that investors can now hold qualifying shares in companies from anywhere in the World [/indent]

– ‘Partly qualifying’ unit trust rules are removed thereby simplifying unit trust rules
Both these changes mean that PEP investors are free to switch their holdings into a wider range of investments when the time is right

-The distinction between General and Single Company PEPs (SCPs) is removed, allowing SCP holdings in one company to be diversified into several holdings

-Now that partial PEP transfers are introduced, investors can choose to transfer a proportion of their PEP rather than having to transfer their entire plan. (Some investors, such as those in regular monthly savings products, have previously been locked into a single plan by the regulations.)