How to pick the right ISA path:

• The ISA was launched on 6th April 1999.

• ISAs replaced PEPs and TESSAs

• More than 50 banks, building societies, supermarkets, fund managers and insurers offer ISA products.

What are the different types of ISAs?

There are 3 types: cash, equity and insurance ISAs.

A cash ISA can either be a simple deposit account or a cash unit trust.

The equity ISA is for individual shares and investment funds such as unit trusts.

An insurance ISA is a shelter for investment bonds issued by insurance companies, such as with-profit bonds, which invest in the stock market and include a nominal amount of life insurance.

Not all companies offer every option - many fund managers will only offer equity ISAs.

How much can I invest?

Up to £7,000 each year until 5th April 2006, after which the allowance will reduce to £5,000. In year one you can put up to £3,000 in cash, £1,000 in insurance and the rest in equities. Alternatively, you can put the full £7,000 in equities. In subsequent years, investors can put £1,000 in cash, £1,000 in insurance and £3,000 in equities. Alternatively, they can put the full £5,000 into equities.

Should I buy a maxi or a mini ISA?

If you buy a maxi ISA, your full allowance must be invested with a single company. You cannot take out a maxi and a mini ISA in any one tax year. If you go the mini ISA route you can invest in separate mini cash, insurance and equity ISAs - but you can only invest £3,000 in the mini equity ISA. Alternatively, you can invest £7,000 in a single maxi equity ISA.

Can I swap ISAs?

You can switch from one ISA manager to another, even in the same tax year, as long as you stick to the same type of ISA. You still have to pay any relevant charges on the new ISA. You cannot switch between the cash, insurance and the equity components of a mini ISA. In other words, you cannot switch the money you have invested in your cash mini ISA with an equity mini ISA.

Can I take out my money?

You can - but the ISA is designed to encourage long-term saving. If you withdraw money from an equity ISA within five years you might get back less than you invested if charges and stock markets have been adverse.

What is a CAT standard?

An official stamp of approval for ISAs that meet certain minimum standards on cost, access and terms (CAT). The standards are voluntary and aim to ensure that investors get a fair deal from scheme managers.

To meet the CAT standard on cash ISAs, for example, managers must pay an interest rate no less than 2% below the Bank of England base rate on a minimum balance no higher than £10.

Should I buy a CAT marked ISA?

The CAT standard ensures no hidden charges, easy access and no unreasonable terms - but does not guarantee good performance.

What happens to my PEP and TESSA?

No further contributions can be made to existing PEPs or matured TESSAs. Any money you have already paid into your funds will be ring-fenced from the taxman.

It was possible for holders of matured to TESSAs to transfer the capital invested (but not the accrued interest) into a TESSA only ISA (TOISA) within six months of maturity of the TESSA to maintain tax free status. This investment was in addition to the normal ISA investment limits.

REMEMBER You should not use any information contained on this page as the basis of any action until you have discussed matters with your financial adviser.