Over 50s ISA Limits

ISA Question:

I’m over 50 and have read a lot recently about the new allowance for people my age to hold more money in ISAs. I’ve never had an ISA before, preferring savings accounts with my building society. Can you explain how they work and if I should get one? I am currently working full time, but looking to retire when I get to 60 in four years time.

ISA Investment Answer from Money Expert Jason Witcombe:

There are two types of ISA, a Cash ISA and a Stocks and Shares ISA. A Cash ISA is just like a bank or building society savings account but with a label on it that says “tax free”. There is no reason why the gross interest rate in a good Cash ISA should be any different to the interest rate on a good savings account.
If you are over 50 you can invest up to £5,100 p.a. into a Cash ISA plus £5,100 p.a. into a Stocks & Shares ISA. Alternatively, you can put £10,200 p.a. into a Stocks & Shares ISA.

Sticking with Cash ISAs, say you get 3% p.a. interest on £5,100. That is £153 p.a. tax free. If it is in a savings account, the gross interest is still £153 but if you are a basic rate taxpayer, the net amount received is £122.40. If you are a higher rate taxpayer there is a further 20% to pay leaving you with net interest of £91.80. Ok, it’s not a big difference when looking at a single year but year on year, the numbers do add up.

Jason Witcombe APFS, CFPCM is a Chartered Financial Planner at Evolve Financial Planning - www.evolvefp.com. Got a money question? In need of some money saving advice from an expert? Put your question to Jason by emailing us here and find out more at: Ask a Money Expert

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