The ISA reaches 21

Back in 1999, when the ISA was first launched, choice was limited to either a cash ISA or a stocks and shares ISA, and the allowance was just £3,000 for a cash ISA or £7,000 for a stocks and shares ISA each tax year. Fast forward 21 years and the overall allowance has risen to £20,000 and the range has been extended.

ISAs have proved a popular investment choice over the years; the latest government figures show around 11.2 million adult ISA accounts were subscribed to in the 2018–19 tax year, with new investments totalling around £67.6bn. The total investment of £20,000 can be spread across different types of ISA. Any investment growth is tax free.

First route to investment

Introduced in 2011, Junior ISAs (JISAs) can be opened by parents or a guardian with parental responsibility (without affecting their own £20,000 ISA allowance) for a child from birth. In March this year, the JISA annual allowance per child was almost doubled to £9,000 each tax year. The child is unable to access the cash until they reach the age of 18. Again, a popular choice, around 954,000 JISAs were subscribed to in the 2018–19 tax year, with new investments totalling £974m.

Lump sum or regular amounts add up

Recent hypothetical analysis reveals that, if you had been able to invest your full ISA allowance for each of the past 21 years (totalling £226,560) and this had been invested in the FTSE All-Share Index, as at 6 April 2020, your total investment would have been worth over £307,0001. And a monthly contribution of £100, invested in the FTSE All-Share Index over 21 years (totalling £25,200), would be worth over £39,000 at 6 April 2020. These figures exclude charges or fees and take into account the large market fall prompted by the pandemic this spring.

If you’re looking to invest tax efficiently, we can help.

1Fidelity and Datastream, 2020

A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation. The value of investments and income from them may go down. You may not get back the original amount invested.