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ISA Savings - Alison Steed, MyMoneyDiva.com

ISA Savings

It may have passed you by in the rush to use the last of the 2009/10 individual savings account (Isa) allowance, but the amount you can shelter from the taxman has gone up this year.

From April 6, you have been able to put away £10,200 into your Isa – a maximum of £5,100 in a cash Isa, with the remainder in a stocks and shares Isa if you wish. That means you can get a sizeable amount more in interest on your money than you could last year.

But wait a minute, why is it that so many of us put our Isa money into the savings pot at the last minute? By doing this, all you are achieving is robbing yourself of 11 months of tax-free interest – on cash Isas at least - that you could have in your pocket rather than the taxman’s.

If the stats are to be believed though, we are getting a lot better at saving again. Regular deposits have jumped by more than a third in the last 12 months, according to Santander, with the average saver salting away £219 a month.

Believe it or not, the average cash savings in the UK for 28m people is £39,000. There are 16.2m of these who have investments, and they have an average sum of £54,566. If you are thinking you are certainly one of the ones pulling that average down, fear not, you are not alone. A further 11.3m people have no savings at all.

Women are saving less than men too, with the average female saver having £31,000 in the bank, compared with £47,000 for the average man – around 50 per cent more.

Men appear to be the keenest savers, with an average of £47,000 in the bank, which is 50 percent more than women who have an average of £31,000 saved.

The thing is, you should try to save what you can when you can, as putting away a little often will build up just as effectively. So make sure you use your Isa allowance this month, rather than leaving it to the end of the tax year. By putting your full £5,100 into an account paying 3.2 per cent – one of the best rates for instant access at the time of writing – at the beginning of the tax year, you will get £163.20 in interest, and none of it will go to the taxman.

But waiting until the end of the tax year means you would get just one month at that rate, assuming it stayed the same – paying you £13.60. So you have effectively wasted nearly £150 in interest by sitting on your hands.

Even if you cannot afford to put the entire amount into the Isa in one go, you can save as much as £425 a month into both a cash Isa and an investment Isa if you want to, and the earlier you put the money in, the more benefit you get from that tax break.
There are few enough perks waiting for us from the Government, with most of us feeling the Chancellor’s hand getting deeper into our pocket each year. So what are you waiting for? Start sorting your Isa out today, and make the most of the tax break available. You could do a lot with that extra money.

Alison Steed

Alison Steed is editor and co-founder of the personal finance website for women www.MyMoneyDiva.com

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