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New ISA allowance could boost savings pots by £45,000

14 October 2009 / by Andy Davies

Over 50 savers who take full advantage of the new ISA allowance could add £45,000 to their savings pot over the next 10 years, according to Fidelity International.

The ISA provider has calculated that an over 50 saver, who makes full use of the new limit by investing the additional £3,000 in a UK equity fund, growing at a rate of 7.5 per cent per annum before charges, could find the fund is worth more than £6,000 after 10 years.

In addition, Fidelity states that the extra allowance could net investors more than £45,000 after 10 years, if they plan to use it every year, which is on top of the returns from the previous ISA allowance.

Similarly, the same contributions invested in a corporate bond fund, paying an annual return of five per cent before charges, could amass almost £40,000 a decade later, or more than £150,000 after 25 years.

Fidelity is now urging the over 50s to shelter more of their money from the taxman, particularly those paying a higher rate of tax.

Paul Kennedy, director of tax wrapper and trust planning at Fidelity International, said: "The benefit of investing the extra allowance into an ISA is evident in our analysis. It can add significantly to an investors' pot of money and can keep a substantial amount of money out of the taxman's grasp too.

"Tax increases seem almost inevitable in the next few years and this means every saver and investor in the country needs to seek the best possible tax advantages for their money now more than ever.

With the new ISA allowance being made available to all investors from 6 April 2010, Mr Kennedy added: "The importance of the ISA as a tax-efficient savings vehicle will continue to grow and we would urge investors to make use of the extra allowance."

© Fair Investment Company Ltd

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†† Income payments are dependent upon the FTSE 100 Index.

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