If you are 50 years of age or celebrating your fiftieth birthday between 6 October 2009 and 5 April 2010 and have been considering putting a little bit more money away into an Individual Savings Account (ISA), now is the time to take advantage.
In line with new measures outlined in the 2009 Budget, HM Revenue & Customs (HMRC) has announced that a higher ISA subscription limit will come into effect from 6 October 2009 for those aged 50 or over on 5th April 2010.
The current maximum cash ISA investment is up to £3,600 each tax year and up to £7,200 for stocks and shares ISAs (less any amount already invested in a cash ISA), but the new higher ISA allowances, could offer an attractive investments option for those aged 50 and over, that will help the financially savvy make their savings work harder and prepare for retirement.
What is changing?
If you were born on or before 5 April 1960, you will be eligible to invest up to £10,200 in ISAs from 6th October 2009.
How much can I invest?
All eligible ISA customers who will be aged 50 or over by 5 April 2010, will have an annual ISA allowance of £10,200 for this tax year (currently £7,200).
You can invest up to £5,100 of the allowance in a cash ISA and the remainder up to £10,200 in a stocks and shares ISA, or you can invest the total allowance in a stocks and shares ISA. You must be aware that while you are allowed to transfer a cash ISA to a stocks and shares ISA without affecting your annual allowance or the tax status of the investment, you will not be able to transfer stocks and shares into cash.
When can I take advantage of my new ISA limit?
If you will be 50 or over on 5 April 2010, you can start taking advantage of the new limits from 6 October 2009.
People like you
Customer A, aged 65, has not invested in an ISA in tax year 2009-10. From 6 October 2009, his ISA allowance will be £10,200. Up to £5,100 of his allowance can be saved in a cash ISA with one provider. The remainder of the £10,200 can be invested in a stocks and shares ISA with either the same or another provider. Alternatively, the full £10,200 can be invested in a stocks and shares ISA with one provider.
Customer B, aged 70, opened a cash ISA in tax year 2009-10, in which she has subscribed £3,600. From 6 October 2009, she will have a total ISA allowance of £10,200. She could save up to another £6,600 in ISAs. This could be up to £1,500 in the same cash ISA, or up to £6,600 in a stocks and shares ISA with either the same or another provider.
Customer C turns 50 on 15 March 2010. He has opened up a stocks and shares ISA in 2009-10, in which he has subscribed £7,200. From 6 October 2009, he could save up to another £3,000 in ISAs. This could be up to £3,000 in the same stocks and shares ISA, or up to £3,000 in a cash ISA with either the same or another provider, or split between the two.
How to choose the right ISA for you
There are two types of ISAs on the market - cash ISAs and stocks & shares ISAs. However, as is the case with all savings and investments, it is essential to shop around and compare features.
Cash ISAs and stocks & shares ISAs are now widely available - but they are not a single, generic product. Always read the associated documents before you make your final choice.
A stocks and shares ISA should be seen as a long-term investment that should be kept for at least five years and while it has the potential for good returns, you may get back less than you originally invested.
To ensure you find the right product for you, check out the wealth of online independent guides to setting up ISAs and, if in any doubt, consult your financial adviser to devise the best savings and investment plan for your financial goals.
