Self Select Individual Savings Accounts or ISAs are part of a scheme that the UK government introduced to help people save for their future. This new scheme replaces the existing PEP (Personal Equity Plan) and TESSA (Tax Exempt Special Savings Account) schemes.
The ISA is a tax-free savings scheme and offers the investor three types of investment opportunities: cash savings, stocks and shares and life insurance. The Self Select ISAs pertain to the stocks and shares component of the ISA scheme and is meant to provide those investors who have some investment experience with a free hand to choose the stocks and shares they would like to invest their ISA in. Otherwise, in the standard stocks and shares ISA, the ISA manager will choose which stocks and shares your money will be invested in.
However, not all ISA managers provide self select ISAs and they tend to be more costly than the ordinary stocks and shares ISAs offered by most financial institutions. The self select scheme is also generally only available for lump sum investments of between £250 and £3,000. This in effect precludes the average investor from joining this scheme.
Since you self select the stocks and shares you are planning on investing in, this scheme only makes sense if you know a little bit about investing yourself. There are limits to which stocks and shares you can invest in, set forth by the ISA scheme. Currently, there are 13 financial institutions that offer the self select ISA, but costs can be expensive, as most firms will charge an annual management fee, normally a percentage of your investment, as well as a brokerage fee for transactions.
The self select ISA scheme also has to adhere to the general ISA contribution rules, which means that you can save up to £7,000 a year until 2005/2006 and then £5,000 a year for 2006/2007.