FOREXUNBLOCKER

When you think of tax-free savings and a bunch of investment flexibilities, ISAs come first in your mind. That is not what others are talking arbitrarily just to market the product there are solid proof for it as well.  If you ask wealth managers about the investment pots that maximize returns in the UK, they will suggest you ISAs.  In fact for any clients they face having same investment goal ISAs is the preferred option.

Now let’s see what are the reasons these advisors prefer ISAs to non-ISAs. We can discuss it through an example.

Assume there is a higher rate taxpayer who has £100,000 in his ISA account.  Now if he wants to put the money for next 10 years what would be his total return after deducting tax savings? And, if he does not shelter the amount in ISAs what would be the expected return? Will there be any difference in return?

Here are the instances:

If you choose fixed interest unit trust fund and 5%is annual yield –

Non-ISA value would be close to £134,400

ISA value would be nearer to £162,700

If it is an equity growth fund and the rate of interest is 7.5% per annum –

Non ISA would produce close to £160,000

ISA would generate near about £206,100

So the returns are higher if you select value ISA

Well, how about lower rate tax payers? In this case also ISA wins over non-ISA investments in bigger margin. Moreover ISAs allow you to select any number of funds from any fund company you like. So the conclusions are very transparent. If you like investing in stock market and want to maximize your allowances stocks and shares ISA is the best option.

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