Stock and Shares ISA and Personal Equity Plans

What is a Stocks and Shares ISA and Personal Equity Plan?

Stock and Shares Individual Savings Accounts (ISA) and Personal Equity Plans (PEP) are both examples of tax privileged investment accounts.  PEP’s were introduced in 1986 and ISA’s were introduced in 1999.  When ISA’s were introduced no further investments could be made into PEP’s and from 6 April 2008 any existing PEP’s automatically became Stocks and Shares ISA.

Whilst slight different in makeup both the various types of PEP’s and Stocks and Shares ISA have the same basic operation, any return from them is exempt from capital gains Tax and income Tax.  There is also no tax payable on money withdrawn from the schemes.  Further both of these schemes only allow a certain value of investment to be made each year.

In respect of PEPs, prior to their withdrawal there were two main types:-

  • A general PEP – these accounts eventually allowed a maximum of £6,000.00 worth of investments to be allocated each year. Originally the limit was £2,400.00 on their introduction and then raised to £3,000.00 in 1988 before being raised to £6,000.00 in 1990.  Such investments were limited to qualifying regulated collective investments.
  • A single company PEP – these accounts allowed a maximum of £3,000.00 worth of investments to be allocated each year. For the most part the investment was limited to shares which were invested in a single company.  However “Windfall” shares received by members from mutual bodies when they became listed companies could also be registered into a single company PEP.

A person was allowed to have both a general PEP and also a single company PEP giving an overall entitlement to a £9,000.00 per year allowance.

In respect of a Stocks and Shares ISA the limit has varied within their history.  At present the annual limit is £15,240.00.  The types of investment allowed in a Stocks and Shares ISA are as follows:-

  1. Cash
  2. Company shares which are listed on a stock exchange which is recognised within the ISA rules and regulations. It is important to note that not every stock exchange or share listed was eligible for inclusion within a Stocks and Shares ISA.  For example for many years’ parts of the Alternative Investment Market (AIM) were not eligible to be included in a stocks and shares ISA.
  3. Funds which are authorised by the Undertakings for Collective Investment in Transferable Securities Directive (UCITS) such as an open-ended investment company (OEIC) or a unit trust.
  4. Investment trust provided that the same satisfy the conditions laid down with the ISA rules and regulations.
  5. Public debt securities, examples include government bonds, debentures, corporate bonds and Euro bonds.
  6. Most recently since 2014 some Core capital deferred shares issued by building societies and some types of insurance policy can also be included.

Under the rules, any cash stored in a stocks and shares ISA needs to be available within 30 days of the request however there can be a penalty (such as loss of interest) for such access.

Whilst PEP’s are no longer sold, Stocks and Shares ISA continue to go from strength to strength.  At present there are thousands of different Stocks and Shares ISA on the market all of which are promising the best rate of return.

How can a Stocks and Shares ISA and Personal Equity Plan be mis-sold?

In respect of the spectrum of investments, provided that you have a competent advisor then a Stocks and Shares ISA and/or a PEP is one of the least risky investments that can be made.  The level of return will be significantly less than other investments but this is reflected in the smaller liability for tax and the low risk afford by them.  However it is possible for these investments to be unsuitable.

As stated previously both Stocks and Shares ISA and PEP are “tax privileged” they are not necessarily “tax free”.  It is possible to incur tax on investments is the various rules and regulations are not followed.  Despite this both of these products are (or were) marketed as being “tax free”.

In respect of a Stocks and Shares ISA in particular, the investments which could be applied to the same has been ever changing.  Therefore there was a risk that tax relief could have been sought on an investment that did not qualify.

Further up until recent changes the tax privilege nature of the Stocks and Shares ISA and PEP did not survive the owner of the same.  Therefore once the investor passed then capital gains tax would be applied (if appropriate).  It was rare for the investor to be made aware of this tax risk.

It is also worth noting that the assets held in a Stocks and Shares ISA are only as secure as the assets themselves.  Therefore whilst you receive tax benefits on any gains from a Stocks and Share ISA, if the investment itself is volatile then the amount within the Stocks and Shares ISA may reduce significantly.

Finally whilst it is risk free, this does not necessarily mean that it is the most suitable product available.  Depending on your appetite for risk you may have preferred another product or one that was marketed by an alternative provider.

What does this mean for me?

This will depend on your circumstances and whether or not you feel aggrieved by the performance of your stocks and share ISA and/or PEP.

It will be most common to feel aggrieved if you have face unexpected tax and/or have not experienced growth as anticipated.

If this does apply then it is important to consider how the scheme was sold to you and whether or not you recall the promises made by your advisor.  Once you have established the facts then it is important to seek professional advice as soon as possible.

How can we help?

Here at Cooper Stern we are experts at advising individuals and businesses on potentially mis-sold complex financial products.

We offer a no-obligation initial review of a potential Stocks and Shares ISA and/or Personal Equity Plan claim, and advise on the strengths and weaknesses of making a claim. Following this, we work on a no-win no-fee basis meaning we will only take forward claims we believe have a strong chance of succeeding.

If you feel you have been mis-sold an Stocks and Shares ISA and/or Personal Equity Plan and want us to look into the matter for you please get in touch. You can fill in our simple online enquiry form and one of our expert advisors will call you back to discuss your mis-sold financial product in more detail. Alternatively, you can call us on 01204 328 287 and we will be more than happy to discuss your queries.

how can we help you?

Have a question?  Get in touch with the Cooper Stern team today.  Simply submit your enquiry and we’ll be in touch.

There are no substantial up-front costs, and our clients like that. The claims we have settled so far have been on a full redress basis. The banks are misbehaving by making offers to businesses, partially repaying what they have paid, and saying they do not need legal advice and making very low offers. I would urge businesses who are affected to get in touch with us before it is too late.

Daniel-Fallows
Dan Fallows
Director, Cooper Stern