With just a matter of hours to go before the end of the current tax year, the clock is ticking if you want to use your annual ISA allowance for 2018-19.
But it’s not too late. You have until midnight tonight to top up your SIPP or ISA - or even open one if you haven’t done so yet. There’s still ample time.
But make sure you do use it and don’t let Brexit or market uncertainty threaten to put a dent in your financial future. Because once the clock strikes midnight tonight, if you haven’t used this year’s allowance, you lose it.
1. Invest in your ISA
Even if you’re wary or unsure of where to invest right now, you can shelter your money in your ISA and make the decision a little later. At least though you’ll have secured your tax-free savings, which is up to £20,000 for those over 18. To set it up all you need to have to hand is your National Insurance number and a bank debit card or your bank details.
Children have an annual ISA allowance too. They can save up to £4,260 a year in what’s known as a Junior ISA (JISA). You can again pay in a lump sum or start their savings habit by arranging a regular investment that will grow nicely until they reach the age of 18 when they can top-up and continue their own ISA journey.
2. Pay into your pension
ISAs are, of course, not the only way to invest for you, or your child’s, future. Pensions are another way to save and reap the rewards of tax-efficient investing. From tomorrow when we start the new tax year, new auto-enrolment levels kick in. Workers and employers have to pay in new minimum contributions of 5% and 3%, respectively, meaning a total of 8% of your earnings have to be paid into your pension.
The amounts will go up from a minimum employee contribution of 3% and a minimum employer contribution of 2% totalling 5% a month into your pension pot.
So, for example, if you earn £30,000, in the current 2018/19 tax year you’ll have been having a total of £99.87 paid into your workplace pension each month; £59.92 contribution from you and £39.95 from your employer.
From tomorrow, the total monthly contribution going into your pension pot will rise to £159.09, made up of £99.43 from your earnings and £59.66 from your employer. That’s an extra £59.22 into your pension in return for giving up £39.51 of your gross monthly salary. But the difference to your take-home pay is only about £21 a month - because your contributions benefit from tax relief. So that’s effectively £21 a month extra to you, but worth an extra £59.22 into your pension.
However, more than 9 million people - many of whom are women and young people or part-time workers whose earnings are below the level at which they’re automatically enrolled in their employer’s pension scheme - will miss out on this chance to pay into a company pension automatically. If you, or your partner, spouse or child, is one of these people then you need to take steps to secure your own financial future.
Everyone can pay into a pension and still get the tax perks; even if you lose out on the “free money” from your employer. But on the plus-side, even someone who isn’t earning a penny, maybe because they’re taking a break, say to look after a baby or care for a relative, can still save for their future in a tax-efficient way.
3. Save without sacrifice
Whether you choose to invest in your ISA or a SIPP or do both, you don’t have to make saving a burden. By saving just £50 a month into your ISA or £80 into your SIPP you can make investing more manageable.
Fidelity’s analysis shows that if you invested a lump sum of £1,200 in the FTSE All Share at the end of each tax year since 5 April 2010 (a total of £12,000) you’d be left with a pot of £16,594.09 after 10 years.1
If however, you had regularly invested £100 in the FTSE All Share every month at the start of each tax year since 6 April 2009 (again a total of £12,000) for the past 10 years, you’d now have a pot of £17,803.20 - a significant difference of £1,209.11.2 Please remember past performance is not a reliable indicator of future returns.
4. Make sure you stay on track
Planning for the future can feel like something of a ‘finger in the air’ exercise. Knowing how much you’ll need and for how long can feel at best like a guess when it comes to your retirement. But it doesn’t have to be. We have tools that can help you make sure you get your figures right and - most importantly - stay on track.
Our easy-to-use retirement calculator lets you see how much you might need for the lifestyle you want.
While our retirement income estimator will help you see whether you’re on track and what you need to do if you’re not.
5. Get informed and get investing
Whether you want to know whether you should be investing in the UK, you want to know if gold is still a safe haven, you have a question about whether emerging markets are a good bet or you’re wondering if bonds are a better option in the current climate, you can put your questions directly to Fidelity’s Investment Director, Tom Stevenson on Tuesday 9 April 2019.
Tom will be setting out his views on all the world’s markets, taking us on a tour of all the main asset classes and looking specifically at where we should be investing in the next three to 12 months.
Any questions you then still have can be put directly to Tom in a live webcast that starts at 12 noon on Tuesday.
To put your questions to Tom and to watch the webcast live, click on the link below on Tuesday lunchtime.
Five year performance
As at 31 March
|FTSE All Share||6.7||-5.3||21.9||1.4||8.8|
Past performance is not a reliable indicator of future returns
Source: Refinitiv as at 31.3.19, in GBP with income reinvested
1 Fidelity International, April 2019, FTSE All share total return in GBP 5 April 2010 - 29 March 2019
2 Fidelity International, April 2019, FTSE All share total return in GBP 6 April 2009 - 29 March 2019
The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Tax treatment depends on individual circumstances and all tax rules may change in the future. Junior ISAs are long term tax-efficient savings accounts for children. Withdrawals will not be possible until the child reaches age 18. A Junior ISA is only available to children under the age of 18 who are resident in the UK. It is not possible to hold both a Junior ISA and a Child Trust Fund (CTF). If your child was born between 1 September 2002 and 2 January 2011 the Government would have automatically opened a CTF on your child’s behalf. If your child holds a CTF they can transfer the investment into a Junior ISA. Please note that Fidelity does not allow for CTF transfers into a Junior ISA. Parents or guardians can open the Junior ISA and manage the account but the money belongs to the child and the investment is locked away until the child reaches 18 years old. Withdrawals from a pension product will not be possible until you reach age 55. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
Get in early to make the most of this year’s ISA
Why not use your new tax year ISA allowance today and see how investing now could help you maximise your returns.