You are here: Home - Investing - Getting Started - News -

Early tax year investors are £1,000s better off in the long run

Written by:
Investors who use their full ISA allowance at the start of the new tax year could see additional returns on their money, compared to last-minute deposits.

Investors could be thousands of pounds better off by being an ISA early bird compared to a last-minute ISA investor or even one who drip feeds money each month.

The research from Fidelity International looked at the investing habits of three hypothetical ISA investors – ‘Early Shirley’, ‘Monthly Monty’ and ‘Last Minute Lara’ – over the past decade and 20 years.

Here’s what it found:

Early Shirley invests her full ISA allowance into the FTSE All Share on 6 April each year and has done so over the past ten years. By being an ISA early bird, she would have seen her original investment of £149,160 grow to £155,836. Over 20 years, the returns are £303,452 on an original contribution of £219,560.

Monthly Monty also starts his investments at the start of the tax year, investing his full allowance in the FTSE All Share over the past decade. However, he prefers to split his full ISA allowance equally over twelve months. With this strategy, he would have seen his investment of £149,160 grow to £153,071. Over 20 years, the figures are £219,560 and £299,165 respectively.

Last Minute Lara waits until the very last day of each tax year (5 April) to invest her full ISA allowance into the FTSE All Share, and as such her £149,160 would be worth £146,912 after 10 years and £286,175 over 20 years.

Ed Monk, associate director for personal investing at Fidelity International, said this is certainly a more challenging start to the new tax year than on previous occasions. However, many investors will be looking to seed their investments this Spring to allow them with as much time to grow as possible.

He said: “Recent market volatility has undoubtedly taken its toll on most portfolios, as demonstrated by the marginal returns generated by our investors over 10 years. However, their performance over 20 years – creating the opportunity to increase returns by £80,000 – highlights the value of taking a long-term view.

“The important thing for investors to remember at the start of this tax year is that they have a choice. Those who have a lump sum available may want to invest in the coming weeks, to give themselves most time in the market.

“However, those who want to spread their investments throughout the year may want to establish a regular savings plan, and could still have the opportunity to build up almost an equally impressive pot as an Early Shirley. Staying focused in challenging conditions isn’t easy but can create the best opportunities to reach your goals.”

Fidelity revealed that one investor waited until the last second on 5 April to open a new account and invest their full ISA allowance of £20,000. On the other side, one investor contributed the full £20,000 allowance just three minutes into the new tax year.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Autumn Statement: Everything you need to know at a glance

Yesterday Chancellor Jeremy Hunt made his first fiscal statement in the role, outlining a range of tax measure...

End of Help to Buy: 10 alternatives for first-time buyers

The deadline for Help to Buy Equity Loan applications passed on 31 October. If you’re a first-time buyer who...

Moving to an energy prepayment meter: Everything you need to know

As households struggle with the soaring cost of energy, tens of thousands of billpayers are expected to move o...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week