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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

ISA Option
Allows ISA Transfers
Regular Savings
  • Protection Scheme: FSCS
  • Fund Choice: Choose from over 4,000 investment options, including one of the widest fund ranges in the UK, plus shares, investment trusts and exchange-traded funds. There’s also expert guidance to help with your investment decisions, which includes a selection of tools and insights from Fidelity’s experts. Capital at risk. Tax and ISA rules apply.
  • Invest From: £25 through regular savings or £1,000 lump sum

Why we like it: Fidelity has lots of investment options, plus an extensive range of guidance tools to help you decide what to invest in. Their award-winning ISA is easy to start and offers great value, their a typical service fee of just 0.35%. Other ongoing charges apply. On top of that, everything is backed by Fidelity’s 50 years of investment experience.

Important: The value of investments can go down as well as up so you may get back less than you invest. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

Tax treatment depends on individual circumstances and all tax rules may change in the future.

Stocks & Shares ISA

from Hargreaves Lansdown

ISA Option
Allows ISA Transfers
Regular Savings
  • Protection Scheme: FSCS
  • Fund Choice: Choose from over 2,500 funds, shares, investment trusts and more to build your portfolio. UK and overseas shares. Corporate and government bonds. Exchange Traded Funds (ETFs). Ready-made portfolios to suit your goals and attitude to risk from £1,000. Expert research to help make your decisions. Investment trusts and much more. Capital at risk.Tax & ISA rules apply
  • Invest From: £25 pm or from £100 lump sum

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

ISA Option
Allows ISA Transfers
Regular Savings
  • 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. Capital at risk. Tax & ISA rules apply
  • 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.

Junior ISA

from Nutmeg

  • Investment Options: Invest in one of four expertly designed portfolios depending on your investment style

Why we like it: Open with a lump sum from £100 to £9,000 in the 2021/22 tax year. After initial investment top up any time with no minimum. Simple, transparent - Invest in one of a range of four expertly designed portfolios depending on your investment style. All four Nutmeg investment styles are built by experts and use exchange traded funds to diversify across stocks, bonds, industries, even countries. Choose the one that works for you. No exit fees and you’re free to make adjustments. You can see where your Junior ISA is invested and how it’s performing. Withdrawals possible from age 18. You can also transfer an existing Junior ISA or Child Trust Fund. If you need any help, financial advisers and customer support will answer any questions you have

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

5 Considerations for Your Next Investment ISA

15th March 2021

You've decided to invest your savings into a Stocks and Shares ISA. You'll be using your tax-free ISA allowance for this year before the deadline, while also investing your money for your future. But what do you need to consider before opening an account? We've put together a list of our top five considerations for you to think about before you click "apply". 

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