TESSA-only Individual Savings Account (TOISA)

TESSAs and PEPs were replaced with ISAs by Gordon Brown in April 1999. Thereafter, no new TESSAs were available but investors were allowed the option of contributing to existing TESSAs until their final maturity date. The very last TESSAs matured in April 2004.

Following maturity, the tax-efficient status of TESSA savings could be maintained through the use of a TESSA-only Individual Savings Account (TOISA). Investors were allowed to reinvest TESSA capital in a TOISA within 6 months of maturity. Any accrued interest or bonuses had to be taken or invested elsewhere.

The TOISA did what it says on the label. It provides an ISA wrapper only for maturing TESSA capital. Investors were not allowed to invest any other funds in it and any investment into a TOISA did not impact on other ISA limits.

Nearly all of the TOISAs that were made available operated on the same basis as cash ISAs. The level of interest rate available varied from institution to institution and was mainly variable although, for those willing to limit the availability of their savings, the rates on offer for notice or fixed rate accounts were, of course, more attractive.

There was also a small number of equity-linked TOISAs on the market that may, or may not, offer a much better rate of return over the longer term. These equity-linked TOISAs tended to be medium-term investments for a set time period, usually five years.. Any attempt at early withdrawal is likely to run into penalties.

See also:

Moneyextra's Savings & Investments Centre Moneyextra's ISA Supplement

Last Updated: May 2008 © Moneyextra.com

MoneyExtra.com recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.