Released on = April 16, 2007, 1:49 am

Press Release Author = Bharat Book Bureau

Industry = Marketing

Press Release Summary = Individual savings accounts (ISAs) were introduced in the UK
in April 1999 and replaced both personal equity plans (PEPs - which were launched in
1987) and tax-exempt special savings accounts (TESSAs - introduced in 1991).

Press Release Body = Individual Savings Accounts

Individual savings accounts (ISAs) were introduced in the UK in April 1999 and
replaced both personal equity plans (PEPs - which were launched in 1987) and
tax-exempt special savings accounts (TESSAs - introduced in 1991). ISAs are a
tax-efficient scheme way of saving and investing, and were designed by the
Government to encourage people to save money. ISAs are the Government\'s primary
vehicle for tax-efficient saving outside pensions. According to the 2005 Budget,
announced in March 2005, more than 16 million people - around one in three adults -
now have an ISA and more than £160bn has been subscribed to ISAs since their launch.

Cash mini ISAs are available from banks and building societies, both on the high
street and online. They are a very simple product, so have a wide appeal to
investors who do not understand the stock market or who do not wish to take the
risks associated with investing in stocks and shares. The sector is highly
competitive, with most providers offering interest rates well above the base rate.
Stocks and shares ISAs appeal to investors seeking capital as well as income growth.
This sector is also highly competitive and investors can choose from a large range
of providers and a wide selection of investments.

In terms of volume, sales of ISAs have remained relatively steady over the 5 years
from 2001 to 2005, but there was a clear decline in the popularity of stocks and
shares ISAs, and a sharp rise in the volume of cash ISAs. Cash on deposit is the
largest sector of the market, accounting for 62.8% of all ISA funds as at 5th April
2004. Investors have increasingly chosen to keep their savings in cash ISAs as a
result of the volatility of global equities and, in particular, the sharp reverses
in equities seen in the early part of the decade. Although cash ISAs offer limited
scope for capital growth, investors know that their initial investment will remain
safe. By contrast, anyone investing in a UK equity ISA in 1999 could have seen the
value of their investment fall by around 50% in the following 4 years.

ISAs are distributed through a wide variety of financial institutions, and the
market is highly competitive. Building societies and the major high-street banks
account for the bulk of cash ISAs, while fund managers represent the overwhelming
majority of stocks and shares ISAs. The Internet is having a large indirect impact
on the distribution of ISAs; not only is it easy for consumers to apply for and
administer their ISA investments online, it is also a very useful research tool.
Investors can now easily and quickly check which providers are offering the best
rates on cash ISAs. Furthermore, the Internet is a particularly useful tool for
stocks and shares investors. Previously, anyone wanting to research the performance
of investment funds, such as unit and investment trusts, before choosing an ISA,
would have had to scour investment magazines or rely entirely on the word of their
financial adviser. However, with the Internet, potential investors can easily
research the performance of funds.

Key Note forecasts that the market for ISAs will continue to grow robustly over the
next 5 years. In fact, total funds in ISAs are likely to almost double in value over
the 5-year period between 2005 and 2009 (as at 5th April). Growth in demand for cash
ISAs is likely to correlate with the interest-rate cycle and the performance of
global stock markets. As any investor will testify, nothing is certain in economics
and economic forecasting is a notoriously hazardous activity. However, Key Note,
along with most other analysts, believes that interest rates reached their peak at
4.75% in the current interest-rate cycle - the Bank of England cut rates by a
quarter of a point to 4.5% in August 2005 - and that they will decline further in
the remainder of 2005 and the first half of 2006. Following this, they are likely to
begin rising again in the remainder of 2006, signalling the start of the next
interest-rate cycle. The performance of the stock market over the next 5 years is
even more difficult to predict, but Key Note\'s forecasts for the ISAs market are
based on the view that the bull run that began in March 2003 will continue in 2006,
and that shares will continue to find support in the remainder of the forecast
period, rising by around 5% to 8% a year.

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