Insurance ISA investors: read this

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Are you one of the small number of people who invest in an Insurance ISA? If so, then you should read this as you may need to rethink your ISA investment strategy.

The Insurance component of the ISA is disappearing as a single entity in April. From this date the Insurance component will become part of the Stocks and Shares component of an ISA. What does this mean?

Firstly, lets dispell the myth that you will not be able to invest in Insurance policies after April. Far from it, it is being merged with the Stocks and Shares component so you can still invest in your Insurance ISA if you so wish to. What's more, as it's being merged with the Stocks & Shares component you will be able to increase what you invest in your insurance ISA - up to £4000 in a Mini, or £7000 in a Maxi.

What about exisiting policies?
All Insurance ISAs opened prior to April 2004 will automatically become a Stocks & Shares ISA.
If you opened an insurance ISA in your current tax year it may be converted to either a Stocks and Shares or Cash ISA from next year. Your ISA manager should have written to you to tell you which it will be. Take note of what they say if you invest in other ISA products as you may accidentially fall foul of the rules (read on)

I invest in other ISAs, can I continue paying into the Insurance ISA?
From April 2005 there will only be the Stocks & Shares and Cash components. If your insurance ISA becomes a Stocks & Shares component and you also invest in the Stocks & Shares component with a different manager then you can only continue investing in both the Insurance and Stocks & Shares part if you move to a single manager.
Likewise if your insurance ISA becomes a Cash ISA and you invest in a Cash ISA, then these need to be with the same manager to continue investing in them both.
In both cases you a limited to a single allowance for that component, i.e. £4000 for Stocks and Shares, £3000 for Cash.

Further (and much clearer) information is given in IR2008: ISAs and PEPs