The concept of Individual Savings Accounts was introduced in the budget in March 1998 and ISA's will become available in April 1999. They are designed to replace the existing PEP and Tessa vehicles, which will no longer be available after this date. ISA's are designed as tax efficient savings plans and the proceeds from these investments will be free of income tax and capital gains tax. There will be a maximum investment allowed of £5000 per annum, of which £1000 can be put into life assurance and £1000 into cash (including National Savings). This annual limit will be raised to £7000 for the first year only. Savers will have the option of having one manager look after the three components of the ISA or having three separate managers looking after the cash, life assurance and stocks and shares. The fixed maximums per component will ensure that savers do not invest too much and break the rules. There are no statutory tie-in periods so access will depend on the individual plan rules.

A tax free investment contract, allowing investment into cash, life assurance and stocks and shares. It replaced PEPs and TESSAs for new contributions from April 1999. Different investment limits apply to maxi and mini ISAs, can be funded by lump sum or regular saving.