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1st
Dec 2020
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ISAs vs Peps: What You Need To Know

ISAs vs Peps: What You Need To Know

You want to put your money to work in an efficient way – you’ve heard the terms ‘ISAs’ and ‘Peps’ thrown around – but what are they, and what do you need to know about each of them? We’ve got the lowdown, broken down for you here in this blog. 

What is a “Pep”?

‘Pep’ stands for ‘Personal Equity Plan’; these were a form of tax-efficient investment account which were available for UK residents in the 1980s-1990s.

They were permitted to contain collective investments (e.g. unit trusts) and money invested in those were protected from tax (specifically, capital gains tax).

No new contributions can be made into PEPs currently, following the introduction of ISAs in 1999 – so if you want to open one, I’m afraid you’re out of luck, as it’s no longer possible. Instead, you should look to put your money into an ISA.

What is an ISA?

‘ISA’ stands for individual savings account. These were introduced in 1999, by then-Prime Minister Gordon Brown.

They were designed to replace PEPS, and differed in that they offered a variety of choice within these accounts. Unlike PEPs, ISAs allow you to put your money into Cash and Investments alike, rather than restricting options to just investments.

ISAs are a tax-efficient wrapper into which you can put your money to gain returns either from interest or investment, which are not subject to capital gains tax or income tax.

ISAs were introduced to replace PEPs, but there are some key differences – the main being that ISAs offer a lot more variety about where you can put your money, as there are a wide variety of different ISA types.

What types of ISAs can I have?

There are a variety of different ISA types, including…

And within these, these are sub-types of ISAs. For example:

Cash ISA Sub-types:

Investment ISA types:

How much can I put in an ISA?

Every year, there is a government-legislated amount that you can put into an ISA which is known as your ISA allowance. The tax year runs from April 6th to April 5th each year, which is known as a ‘tax year’.

For the tax year 2020/2021, the ISA allowance is £20,000.

You can choose to put all of this into one type of ISA, or you can spread this allowance across a variety of ISA types.

But for some ISA types there are limits on how much you can put in each tax year. For example, you cannot put more than £4000 into a Lifetime ISA each tax year, and £9000 into a Junior ISA. You also cannot open more than one Investment ISA each tax year.

Lots of ISAs are very useful in saving for different purposes so it’s good to make sure you’ve researched each ISA type before you make a decision about which one is right for you. Read our ISAs Explained page for more information. 

Investment Fund Supermarket ISAs

Stocks & Shares ISA

from Fidelity

Allows ISA Transfers
  • Protection Scheme: FSCS
  • Fund Choice: Select from over 4,000 funds. Large selection of UK shares. Investment trusts, ETFs and investment portfolios put together by experts.
  • Invest From: £25 per month or lump sum from £1,000

Why we like it: Investment choice from over 100 fund providers, giving you access to 4,000+ funds. Great service – from investment guidance on website through to UK-based phones team. PathFinder, Select 50, Investment Finder - investing tools for beginners to advanced investors. 24/7 access via online Account Management system.

Important: The value of your investments can rise as well as fall. You may get back less than you invested. If you’re unsure, we recommend you ask for independent advice.

Selected ISAs

Stocks & Shares ISAs

from Legal & General

Allows ISA Transfers
Regular Savings
  • Fund Choice: Choose from 50+ L&G funds including low cost index tracker funds, multi asset, fixed income, property & equity funds. Alternatively let L&G managed your funds for you based on your risk profile.
  • Invest From: £20 per month or £100 single

Why we like it: Legal & General can help you save for a brighter future with their stocks and shares ISA. Choose from over 50 funds, including ready-made investment options that spread your money across different investments for you and sustainable funds that seek to make a positive difference without compromising financial returns. Please remember with investments, your capital is at risk, the value of your investment and any income from it may fall as well as rise and is not guaranteed. You may get back less than you invest.

Important: Please remember the value of your investment and any income from it may fall as well as rise and is not guaranteed. You may get back less than you invest.

Investment Fund Supermarket ISAs

Stocks & Shares ISA

from Hargreaves Lansdown

Allows ISA Transfers
  • Protection Scheme: FSCS
  • Fund Choice: 2,500+ Funds
  • Invest From: £25 pm

Why we like it: Choose your own funds or alternatively a ready made portfolio. Market-beating savings and discounts of up to 5.5%. No charge to buy and sell funds. Low, tiered annual charges for holding funds, with a maximum of just 0.45% per annum. Free fund updates and analysis from experienced research team. Invest with a financially secure, FTSE 100 company.

Important: The value of your investments can rise as well as fall. You may get back less than you invested. If you’re unsure, we recommend you ask for independent advice.

Stocks & Shares ISA

from Interactive Investor

Allows ISA Transfers
  • Protection Scheme: FSCS
  • Fund Choice: Access 40,000+ UK, US and international shares on 17 global exchanges. Choose from over 3,000 funds or select a ready made portfolio. Investment trusts, ETFs, Bonds & Gilts. Option to invest in 6 low cost funds selected by experts to get you started.
  • Invest From: £25 a month or any lump sum

Why we like it: An award-winning ISA that gives you complete control. The second largest platform in the UK with the widest choice of investment options in the market including funds, investment trusts, ETF’s and more. Strong ethical investment proposition with more than 140 investment options. Open online in less than 10 minutes. Access to expert independent ideas and analysis. Low cost fees and trading.

Important: The value of your investments can rise as well as fall. You may get back less than you invested. If you’re unsure, we recommend you ask for independent advice.

Junior ISAs

Junior Stocks and Shares ISA

from Hargreaves Lansdown

Regular Savings
  • Investment Options: Invest from £25 per month or deposits of £100.

Why we like it: Invest for your child from £25 pm tax free. A wide range of top performing funds to choose from. The annual charge for holding investments in a Hargreaves Lansdown Junior ISA is never more than 0.45%. Your dealing and other charges will depend on the investments you choose.

Important: The value of your investments can rise as well as fall. You may get back less than you invested. If you’re unsure, we recommend you ask for independent advice.

Important Risk Information:

The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website aims to provide information to help you make your own informed decisions. It does not provide personal advice based on your circumstances. If you are unsure of how suitable an investment is for you, please seek personal advice.

High Income ISAs

High income ISA ideas:

ISAs Products

Cash ISAs

Fixed Rate & Instant Access ISAs:

Cash ISAs: 

Stocks & Shares ISAs

Types of Stocks and Shares ISA include: 

Stocks and Shares ISAs

Latest News

How much can I pay into an ISA?

26th January 2021

Each tax year, there's a limit set by the government to the amount you can save and invest in ISAs: your “annual ISA allowance”. The allowances are intended to reward savers and encourage us to invest more to support our future retirements, without creating a tax haven that can be taken advantage of by very wealthy individuals who just want to avoid paying tax.

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