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New ISA limit available to regular savers from next week

Lucinda Beeman
Written By:
Lucinda Beeman
Posted:
Updated:
03/04/2014

Savers can start to take advantage of new ISA limits as early as next week by splitting their annual contribution into regular monthly deposits.

During last month’s Budget, Chancellor George Osborne raised the tax-free ISA allowance limit to £15,000 from 1 July.

However, savers who divide their savings into 12 separate deposits of £1,250 can start to take advantage of the new threshold from Monday 6 April.

Mike Barrett, platform manager at Skandia, said: “The changing structure is not only great for seasoned ISA investors, but also for those who may have previously been hesitant to invest in the stock market as it allows them ‘dip their toe in the water’ within a single product.”

Many savers rush to use up their ISA allowance in the weeks leading up to the end of the tax year, or invest their total allowance as a lump sum in the first few weeks of the new year.

However, data from fund group Fidelity shows people who split their yearly ISA contribution into equal monthly deposits or invest a lump sum at the beginning of May will finish the tax year thousands of pounds better off than a last-minute lump sum saver.

In a comparison of three hypothetical savers, all of whom invested their full ISA allowance each year over the last decade in the FTSE All Share Index, the monthly saver came out £6,769 better off than the saver who deposited lump sums during the first weeks of April.

  Total invested (full ISA allowance since tax year ’03-’04  Final pot now 
Saver A (the lump-sum earlybird, who starts investing at the beginning of May each year)   £93,080  £168,687
Saver B (the monthly saver, who splits their payments equally each month and starts doing this at the beginning of May each year)  £93,080  £144,477
Saver C (the lump-sum late-comer, who leaves it until the first few days of April each year to invest)  £93,080 £137,708

 Source: Fidelity Personal Investing, March 2014