TESSA

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TESSA

(ˈtɛsə)
(in Britain) n acronym for
(Banking & Finance) Tax Exempt Special Savings Account; a former (available 1991–99) tax-free savings scheme
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This month's maturing TESSAs are likely to be a disappointment.
Some TESSAs pay fixed interest rates, others are variable rate ones.
Mike Bishop, area director for TSB Scotland, said: "TESSAs have proved very popular since their launch in 1991.
The brainchild of former Chancellor John Major, Tessas were launched in a blaze of glory during the heady days of double-digit returns on investment plans.
Five million savers put pounds 30 billion between them into TESSAs - the Tax-Exempt Special Savings Account - introduced by former Premier John Major 10 years ago.
In April 1999, ISAs will replace tax-free PEPs and TESSAs.
First Direct and Loughborough Building Society both pay 6.75 per cent gross on their no-penalty variable rate TESSAs. Coventry Building Society pays 6.65 per cent.
TESSAs worth around pounds 5billion are due to mature in the first quarter of this year.
But N&P is arguing that, although ISAs were introduced by the Government in April 1999 when Tessas were withdrawn, they are different from Tessas and consequently the two rates cannot be compared.
Six million savers still have billions locked into TESSAs because you have to leave your money untouched for five years to keep your interest tax free.
If you want to be able to switch between TESSAs in future - in case you can get a better rate, or decide to lock into a fixed rate - start in one with a low, or no, transfer penalty.
If you have money to save, then take a look at TESSAs and Personal Equity Plans (PEPs) - both tax-free.