Savers rush to buy, but they can't tell PEP from an ISA

(So What is an ISA?)

THE ISA, which replaces the Pep and the Tessa from today, stands for Individual Savings Account. It is a new tax-free vehicle that combines cash savings with investment in stocks and shares. The total amount that can be placed in an Isa in the first year is pounds 7,000.

IF IGNORANCE is truly bliss, then customers who beat a path to the Abbey National branch at Brent Cross shopping centre in north London yesterday must have been in a state of unalloyed ecstasy.

For those people who missed the barrage of publicity over the weekend, yesterday was the final opportunity to buy PEPs and Tessas, the tax-exempt personal equity plans and special savings accounts.

From today, they will be replaced by a new financial product, the ISA, or Individual Savings Account.

So, rather than visit Alton Towers or stock up on seedlings at the garden centre, many people decided to spend their bank holiday Monday queuing up at those branches of banks and building societies that opened to deal with the last minute stampede.

Presumably, these customers had thought long and hard before making the decision to plough their money into a PEP or a Tessa. No doubt they were well acquainted with the relative merits of these two savings vehicles, compared with those of the new ISA. And it went without saying, surely, that they certainly knew what all these cursed initials really stood for.

There was a long pause as Simon Levy, 42, scratched his head, rolled his eyes and awaited inspiration. Mr Levy was about to buy himself a new PEP at the Abbey National, but appeared more than a little hazy about its newly announced rival, the ISA. "It stands for, let me see, Investment Wotsit Account, doesn't it? Or is it Independent something or other?"

Mr Levy was not alone in his uncertainty. Only a tiny handful of Abbey National Customers at Brent Cross knew the meaning of all three acronyms. "It's like wading through alphabet soup," said a harassed-looking woman, queuing with two small children .

The ISA was heralded by Gordon Brown, the Chancellor, in his Budget speech as the answer to every small investor's prayers. Yet few people yesterday could say with confidence exactly how it works. "It's like a PEP, only different," said one. "Isn't it a new type of savings' scheme?" asked a potential investor. "Haven't a clue," replied another.

They had no more than a glimmer of a notion, either, of the amount of money that can be invested in the first year of an ISA. "Is it pounds 18,000?" suggested one over-optimistic young woman.

Abbey National, whose financial advisers were working flat out yesterday, had gone to great lengths to fill in the gaps in customers knowledge. Leaflets explaining the different options were spread liberally over a table at the entrance to the branch, while the walls were festooned with posters that seemed designed to whip customers into a frenzy of financial activity. "The countdown has begun... it's the last day!" they proclaimed with a real sense of urgency.

Maureen Bell, customer service manager at Brent Cross, acknowledged that the enthusiasm of would-be savers and investors was not matched by an understanding of the fine print, or even in some cases the details printed in rather larger type. "A high percentage of people who want to buy these products don't know what they are," she said.

That could be because they had left it to the very last minute. "I'd meant to buy a Tessa, but I forgot," explained Dora Holdsworth, examining one of the building society's information leaflets. "Then I heard a report on the radio this morning, and realised it was now or never."

Judging from the response of customers yesterday, Gordon Brown has still got a long way to go before the British public opens its heart and wallet to the ISA. Of all three options, it was the one about which least was known. And among ordinary shoppers at Brent Cross, the mere mention of it provoked bewilderment and startled looks. "ISA, never heard of it," said one woman laden with carrier bags. "What is it, some kind of ice- making machine?"