Individual Savings Accounts (ISAs) are a tax-efficient way of making long-term savings.  Capital growth is not taxable, but dividends on shares are taxed at the basic rate, and this tax is not reclaimable.

You can have access to your money at any time, or simply keep your ISAs and PEPs invested for the long term, and take the income in retirement.  Of course, if you are investing in shares, property or fixed interest, there's no guarantee that your investment will be worth more than you paid in.

The ISA regime is rather complicated. In this section we provide a simple summary of the ISA rules for investors, and discuss who should have one, and the relative merits of ISAs and pensions.

Note that the rules have changed from April 2010.  The overall allowance will rise to £10,200, which can either be entirely in "stocks and shares", or split equally between cash and stocks and shares.  You will also be able to transfer cash ISAs into stocks and shares ISAs.

No new contributions to PEPs are permitted.  However, holdings in existing PEPs can changed and transferred, and still carry the same tax benefits as ISAs.

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Please click here for the updated rules on ISAs/PEPs