The Government have decided to allow a wider range of investments to be accepted into ISAs and PEPs. In future all UCITS will be accepted as qualifying investments for ISAs and most UCITS will be qualifying investments for PEPs. We will be bringing forward amending regulations to achieve this shortly.This change to ISA and PEP investment qualification responds to the replacement by the FSA of different categories of pooled funds (such as securities schemes and warrant schemes) with a single category of "UCITS schemes". This follows the implementation by the FSA of the UCITS Amending Directive on investment powers.Given the wide range of investments allowed to a UCITS scheme, not all UCITS schemes can be allowed into the stocks and shares component of an ISA, or into a PEP. To maintain the distinction between cash-like equities (which can be held in the cash component of an ISA) and other equities (which can be held in the stocks and shares component of an ISA, and in a PEP), the Government have proposed a test to distinguish between cash-like and other UCITS schemes based on the proportion of capital which an investor could be certain or near certain of receiving from their investment. Investments that would return at least 95 per cent. of the investor's original capital would be eligible for the cash component of the ISA—lower returns of the original capital would be eligible for the stocks and shares component of the ISA, and the PEP.This proposal has been welcomed by the industry as simple and workable. We will be talking to them further about the detailed arrangements.The overall result is that ISAs and PEPs will become an even more flexible savings and investment as they will be able to accept a wider range of investments.
The Financial Secretary to the Treasury