Over 50s ISAs: Save more money in an ISA if you are over fifty and you could add as much as £45,000 in tax-free savings in ten years.
In this article:
  • Over-50s ISA Limits Explained.

Savers over 50 who make use of their extra £3,000 ISA allowance, could see it make a real difference to their savings pot over the next decade, argues the UK’s largest manager of ISAs

Over 50s ISAs: How the new ISA Limits Work

Fidelity International calculates that if someone over 50 invests the extra £3,000 in a UK equity fund growing at a rate of 7.5% per annum before charges, it could be worth £6,183 after ten years and £18,295 after 25.

The extra allowance, which will be available to all ISA investors from 6th April, 2010, is worth even more if an investor plans to use it every year - growing to £45,624 after ten years and £219,229 after 25. That’s on top of the returns from the current ISA allowance.

Over 50s ISAs: How they Compare to Bond Funds

The same contributions invested in a UK corporate bond fund, paying an annual return of 5% per annum before charges could result in a pot of money worth almost £39,620 a decade later or £150,340 after 25 years.

Outside an ISA the taxman is going to take part of any return you receive for investment, but inside an ISA he is not. Just how much extra the investor will get back by sheltering savings in an ISA will depend upon the type of investment and their tax rate.

In the corporate bond fund example above a higher rate taxpayer could increase their return by over 100% and a basic rate taxpayer by 37%. Anyone about to be subject to the new 50% income tax rate could see an extra 150% added. This means the basic rate taxpayer keeps an extra £20,400, the higher rate taxpayer £37,681 and the 50% payer £45,305 that would otherwise have simply been given to the taxman over the years.

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