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20 years of ISAs - how regular savings have reaped rewards

Emma-Lou Montgomery

Emma-Lou Montgomery - Fidelity Personal Investing

Cast your mind back 20 years to 1999 and you might remember it as the year Spice Girl Victoria Adams married footballer David Beckham, or when actress Angelina Jolie divorced her first husband, actor Jonny Lee Miller. Bill Clinton was president of the United States and rapper Eminem released his debut album. It was also when The Sopranos, Queer as Folk and Family Guy all hit the small screen for the very first time.

20 years of ISAs - how regular savings have reaped rewards

If you were also smart and started investing in a fledgling tax-efficient savings wrapper called an ISA that year, you could now be sitting on an investment worth £386,982 today.1 Because 1999 was the year that the ISA - or Individual Savings Account to give it its full name - was launched, in an attempt to encourage more of us to start saving and investing for our future. Please remember past performance is not a reliable indicator of future returns.

And figures from Fidelity International show that for someone who did invest, they could have done very nicely indeed. So much so that, had you started investing your whole ISA allowance that year into the FTSE All-Share and then continued to invest the full allowance every year until now, you could be sitting on an ISA pot worth a cool £386,982 today1.

ISAs were introduced by the then-chancellor Gordon Brown to replace Personal Equity Plans (PEPs) for people investing in shares and Tax-Exempt Special Savings Accounts (TESSAs) for cash savers.

Back then, and indeed for the first nine years, the overall subscription limit in an ISA was a relatively modest £7,000. Since then, it has been substantially boosted on three separate occasions, and enjoyed incremental increases in most other years, up to the current, and not insubstantial, £20,000 a year limit.

The ISA has also evolved in other ways over the past two decades. Originally split into a maxi version and a mini version, savers and investors had to initially choose whether to invest all their allowance in shares or put some into cash savings.

Today, the £20,000 annual allowance and the freedom to save or invest money within your ISA is far greater. Junior ISAs have been launched, enabling parents to save for their children, and in addition there are a host of other ISAs aimed at targeting specific goals and investments, such as the Help to Buy ISA, the Lifetime ISA and the Innovative Finance ISA.

However you invest in an ISA, the figures show that saving regularly into one can be highly beneficial and a great way to make your money grow. Obviously, the longer you leave your money invested, the longer it has to grow, but our figures show that even if you had only started investing your full ISA allowance every year over the past 10 years into the FTSE All-Share, you would still have a savings pot of £199,942.2

Of course, hindsight is a wonderful thing, but the good news is that there’s plenty of time to get started and start reaping the potential rewards.

Even if you can’t afford to invest today’s full annual ISA allowance of £20,000 or even the original £7,000 annual allowance from back in 1999, then a regular £100 a month will still build you a nice little savings pot.

Had you saved £100 a month into the FTSE All-Share over the past 10 years you would today be sitting on an ISA pot worth £18,2283 and if you’d started saving that £100 a month back in 1999, you would have £50,452.4 And that’s not to be sniffed at.

You can save as little as £50 regularly into an ISA. So don’t be put off by the £20,000 allowance. If you’ve got it, invest it, but if you haven’t, start small. As you can see, with a little dedication and a commitment to make a regular saving into your ISA you can reap the rewards.

Now all you need to do is sit back and dream about what you will do with the money, while it works its magic for you.

More on ISAs

Five year performance

(%)
As at 19 June
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
FTSE All-Share 4.4 -6.2 29.0 5.7 0.5

Past performance is not a reliable indicator of future returns

Source: Fe, as at 19.6.19, in GBP terms with income reinvested 

Source:
1Fidelity and Refinitiv, lump sum, maximum ISA investment made annually into the FTSE All-Share from 6.4.99 to 5.4.19
2Fidelity and Refinitiv, lump sum, maximum ISA investment made annually into the FTSE All-Share from 6.4.09 to 5.4.19
3Fidelity and Refinitiv, monthly savings of £100pm into the FTSE All-Share from 6.4.09 to 5.4.19
4Fidelity and Refinitiv, monthly savings of £100pm into the FTSE All-Share from 6.4.99 to 5.4.19

Important information

The value of investments can go down as well as up so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. 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.