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Savers are expected to deposit as much as £4bn into ISAs in the week leading up to the new tax year, according to Yorkshire Building Society.
Their figures revealed that £4.3bn was deposited into ISAs in the final week of the 2017/18 financial year, and it is expecting similar activity to happen this year. This is despite the number of ISA holders falling: the number of people saving into an ISA fell from 11.1m in 2016/17 to 10.8m last year, which, according to the building society, is the lowest number of adult ISA holders since the turn of the millennium.
However, there are clearly still millions of savers out there looking to take advantage of their tax-free allowance – but with the end of the tax year on the horizon, they may not want to wait too long, as Louise Halliwell, senior savings manager at Yorkshire Building Society, commented: "The last day of the financial year marks a milestone date for savers to be aware of. Based on the number of savers who rushed to deposit money in their ISA in the final weeks of last year's deadline, we anticipate there'll be savers needing that extra reminder again this year.
"Anyone hoping to take advantage of this year's tax-free allowance should act quickly to make sure their money is deposited and processed for this financial year. The message is, use it or lose it, as the £20,000 ISA allowance can't be rolled over to the next year."
ISAs were originally launched 20 years ago as a tax-free saving option. At that time, the total tax-free allowance was £7,000, but at least £4,000 of that had to be invested in funds (in other words, in a stocks & shares ISA). This meant the maximum that could be saved in a cash ISA was £3,000. Over the years, the ISA portfolio has grown to include Help to Buy ISAs, Innovative Finance ISAs and Lifetime ISAs
, along with the original cash ISAs and stocks and shares ISAs. In addition to this, the tax-free saving allowance has increased, and today savers are allowed to deposit up to £20,000 into their ISAs for the tax year, and won't pay tax on any of it.
Junior ISAs (JISAs) were launched later than the adult version, with the first accounts available on the market in November 2011, over 12 years after the launch of the original ISA in April 1999. According to Zurich, just over £4bn has been invested in JISAs since then, with these accounts offering a popular way for parents to build a nest egg for their offspring. They initially had a subscription limit of £3,600 but this has also increased in the years since their launch, with savers now able to invest up to £4,260 in the current tax year and £4,368 in 2019/20.
However, when choosing a Junior ISA, savers need to be aware that they will likely be saving money over a longer period of time – money held in a JISA can't be accessed until the child turns 18 – and much like with an adult ISA, they ideally need to ensure that the interest rate is higher than inflation so that the money saved gains value over the years. To find the best JISA rates, take a look at our Junior ISAs comparison chart.
Alistair Wilson, head of retail platform strategy at Zurich, commented: "The popularity of the JISA is only set to boom as it becomes an increasingly integral tool in passing wealth through generations. Not only does it provide a safe haven from inflationary pressures, but the benefits of compounding also can't be ignored. Starting to save early pays significant dividends and could well be the extra pounds that support children learning to drive, funding their university studies, travelling the world or taking that all important first step on the housing ladder."
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