Types of ISAs Available

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Types of ISAs Available

The 2008 budget saw the ISA rules changed to incorporate different ISA products.

The two main types of ISAs available to the UK public previously - Maxi ISA and Mini ISA – are no longer available and consumers now have the option of cash ISAs or Stocks and Shares ISAs.

Unfortunately, ISA rules are complicated and each year anyone opening an ISA must choose carefully which type of ISA they want. Whereas in the past an individual could invest in up to two Mini ISAs (one for each component) each financial year, now consumers can take out both a Cash and Stocks and Shares ISA.

Maxi ISAs become Cash ISA and Stocks and Shares ISA

Whereas before there were two components to a Maxi ISA - Cash and Stocks & Shares, the 2008 budget ruled that Maxi ISAs no longer exist and ISAs of this type are divided into Cash ISAs and Stocks and Shares ISAs.

The entire annual ISA allowance (£7,200) can be divided between the two components, with cash making up a maximum investment of £3,600 of the £7,200 allowance.

Similarly, in the past investing into a Mini ISA account allowed the consumer to choose a different ISA manager for each of the components, e.g. the cash component could be placed with one manager and the stocks and shares with another. This legislation has not changed.

Before the 2008 budget, the rules strictly prevented the opening of a Mini and Maxi ISA in the same tax year. Mini ISAs were the preferred choice for the risk averse or for those only wanting a Cash ISA from a building society or bank, but the new legislation allows borrowers to choose between a Cash ISA or a stocks and shares ISA.

Cash ISAs

ISA providers offer different types of Cash ISAs. Some will offer instant access to money with no penalty or loss of interest, while other providers have restrictions, such as a fixed term or require notice before any money can be withdrawn. If these restrictions are breached e.g. a withdrawal is made within a fixed period - then a penalty or loss of interest will occur as a result.