Why would the average investor open an equity ISA?

Its not only CGT. Sure, Gordon Brown took away many of the advantages but there are still benefits.

1 - CGT. Yes, start with the basic. In the 1990s you could double your money in 3 years at one point. Indeed, those that invested 2 years ago could have nearly doubled their money now. Remember CGT is your overall realised gain and not just one investment. Use your allowances over the years and you can save yourself CGT.

2 - Income tax. Higher rate taxpayers benefit and those that are borderline high rate taxpayers benefit by not being pushed into higher rate tax.

3 - Age allowance. The income on ISAs does not impact on age allowance and force a reduction.

4 - Pension credit. The income from the ISA does not get included for pension credit. Although to be honest, not many are going to have equity ISAs if they are on pension credit.

5 - Corporate Bond/Gilts are still tax free in an ISA.

6 - Retirement planning. Build up a fund inside an ISA to supplement your pension and then when you retire and switch the ISA to income paying assets, that income is tax free and does not get included on any tax return.

For ISAs, the best option is a fund supermarket. There are 4 big ones and each has its pros and cons. e.g. one doesnt allow regular withdrawals, one charges on switching, one has potential double charging. However, having access to all those funds is pretty good. That being said, whenever i place an ISA I still check the funds are not available cheaper from the provider themselves and I check the 4 supermarkets as they all run different offers from time to time. Suggest you do the same if you go down that route.

Don't use a bank for equity ISAs. Their funds are expensive and traditionally underperform. Halifax do have an offer on one of theirs at the moment which makes is a little cheaper (no initial charge) but its still not a great fund.

A funds supermarket is what it sounds. The ISA provider is just an administrator providing you with online information, transactions and statements. They have a range of usually many hundreds of funds from all the major fund managers.

The main four supermarkets are cofunds, fidelity fundsnetwork, selestia and skandia. Cofunds is one of the most widely used by the online websites as they have a website plugin which allows online dealing. Negatives on cofunds are that you cannot take regular withdrawals from their ISAs and they have a 1% switching charge. Cofunds service is awful from an admin point of view. I have contacted them 3 times on an issue since late Jan and they havent responded once yet. Fidelity is a good all rounder although the postal information you get on your holdings is not extensive. Good online site and tools though. Selestia is a good provider. They tend to have special offers on funds periodically making them quite cheap on some funds. I have found their service excellent on the whole. Indeed, when i contact them, i virtually always get through to the same person. Skandia is one I havent used on the ISA side although i have heavily used them on pensions. Their service on pensions is excellent and I have no reason to believe it would be different with their ISAs. I have been given the impression though that they are more expensive to use than the other fund supermarkets (although still cheaper than the banks generally).

A lesser used option is Sterling. They have a smaller range of funds available but they do have a guarantee return in the event of death of your original investment or the value, whichever is higher. This can be useful for those later on in life who may be put off by equity risk but like the idea that their estate will at least get the money back if it all goes wrong.

Most allow £1000 per fund min investment. It is worth having multiple funds as no-one knows what is going to be best so spreading it around helps. Spreading it with a fund supermarket is easy. Spreading it with a tied provider doesnt give you much option when they may only offer a handful of funds.