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Over 50′s ISA – What You Need to Know

An ISA or Individual Savings Account is a government-sanctioned scheme designed to get us saving. Essentially, they allow you to save a certain amount of money every year tax free, rather than pay tax on the interest as you normally would.

The closer you are to retirement, the more important saving becomes. If you were putting some money into your pension fund aged 35, it will have grown in line with your investments. As you age, the money you put in has less time to mature, so any shortfall in your pension plan will be harder to make up. Assuming a modest 3% growth, saving a lump sum for your retirement of £100,000 for example, would only require a £175 monthly investment aged 35. Leave that until your 50, and you'd have to find £445!

Recognising this, the government has recently raised the new ISA allowance for the over 50s to help those who might want to put down a little more. The over 50s can now save £10,200 per tax year in an ISA (up from £7,200). This is actually split into two sections with up to one half going in to a cash ISA and up to one half (£5,100) going in to a stocks and shares ISA.

Cash ISAs work much like regular saving accounts apart from two key differences. Firstly, all interest that you earn is tax free (unlike regular savers where the tax is usually deducted automatically). Also, and perhaps crucially, the amount of money you can put in during a tax year remains fixed. Even if you take lots of money out, you can still only put £5,100 in.

A Stocks and Shares ISA works a little differently. The money is invested in the stock market so the return is not guaranteed (as the stock market goes both down and up). The tax implications are also slightly more complex so you should ideally talk to a finance professional for help understanding your tax situation.

Hopefully, with a range of tax-free options available to you, your retirement need not seem so daunting. Planning ahead and getting independent advice are without doubt the keys to a prosperous and secure retirement.

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