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ISA limit for over-50s is £10,200 from today

Older UK savers can now invest £10,200 in ISAs

A quick reminder that the annual ISA contribution limit has gone up to £10,200 a year if you’re lucky enough to be 50 or over between now and April 5th 2010.

(Let’s be honest, eh? We’d all rather have the riches of the young!)

The rest of the populace will have to wait until April 6th 2010 for the new ISA limit to apply.

I’ve written in detail why all UK investors should try to exploit this new maximum ISA limit to the full, by investing in stocks for the long-term.

As I calculated:

  • Under the previous scheme, you could save £7,200 a year tax-free, or £600 a month. After 20 years at 8%, you’d have £343,596.
  • Under the new ISA regime, you’ll be able to save £850 a month. After 20 years at 8% you’d have £486,761.

That doesn’t mean I think the Government was wise to bring in a new limit halfway through the year, and only apply it to 50-plus investors.

In fact, I think it’s blatant electioneering!

At the risk of another political annoying my overseas readers, I can’t help noting that it’s pretty much an open secret that the UK will have General Election in Spring 2010.

Given that the over-50s are by far the keenest voters, the early timing of the rise for them is a blatant sop ahead of the painful public spending cuts to come.

ISA limit raise halfway through year causes chaos

Political issues aside, raising the limit through the year has caused confusion for providers and investors alike, too.

What are providers supposed to do if they offered higher fixed rate ISA cash savings earlier in the year? (Answer – some are allowing you to put more money in at the old higher rate, others won’t).

Worse, what if you ignored my warnings about structured products and put money into a guaranteed equity bond or similar when the FTSE was much lower (instead of simply investing in an ISA index tracker)?

No ISA provider is going to let you top-up a guaranteed bond taken out when the FTSE was at 4,000 now it’s over 5,100 — it would represent a big and instant loss for them, since the securities they buy to provide these returns will have been long since repriced by the market.

Unfortunately about the only thing you can do if you have these sorts of ISAs is phone your supplier and see what your options are. They may be able to do something creative to enable you to invest the difference.

If you’ve got a variable rate cash rate ISA or a stocks and shares ISA (my preferred use of ISAs) then there should be no problem bunging in extra money to use the full limit for 2009/2010.

Again, see what your provider has to say.

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