New ISAs could make you a millionaire in just 25 years, according to Fidelity Personal Investment. If you put the full £15,000 limit into stocks and shares ISAs every year your money could grow fast and hit the big £1m in just 25 years’ time. So even if you’re 40 now, you could put cash in each year and have a nice, rich retirement.
The big leap in the ISA limit isn’t the only good news with the New ISAs. Here’s the lowdown on what you can do with your tax-free money from now on…
- It used to be that you could either put the full ISA amount into stocks and shares or half of it into a Cash ISA and half into shares.
- Now there’s just one single ISA (New ISA) and you can put a maximum of £15,000 (nice round number) into it. It’s up to you whether you put the lot into shares, into cash or into a mixture of cash and shares.
- Or you can have a separate cash ISA and stocks and shares ISA, which can be held by different providers (say Lloyds and L&G).
- Not only that, but you can now switch your old stocks and shares ISA to a cash ISA as well as switching your old cash ISA into a stocks and shares ISA.
- However, you can only hold a stocks and shares ISA if you are over 18. If you are over 16 but under 18 you can only have cash ISAs.
- The old rule that you mustn’t take the money out of one ISA and put it into another ISA still holds. If you want to switch them over you need to do it ‘behind the ISA line’ – in other words, contact the provider/bank/investment house you want to move to and get them to arrange the transfer. If you take the money out and put it in again you will have used up your ISA allowance, or some of it, for this year.
- Junior ISAs have improved too. The new Junior ISA now has a limit of £4,000 a year (as does the Child Trust Fund, CTF) and from April 2015 you will be able to transfer a CTF into a Junior ISA.
There are some extra improvements coming up later. For example, the Chancellor has announced that we will, soon, be able to put money into social lending platforms through the ISA. This means money can be put into sites like Zopa, Ratesetter and Funding Circle which we at MoneyMagpie are fans of.
You know what I’m going to say here!
I see ISAs (like ISAs) as long-term investments, so the best place to put your money each year is into equities (stocks and shares) ISAs.
If you put your money into cash ISAs and leave it there for longer than five years, you will be effectively losing money as inflation will erode any gains you make.
Long-term, stocks and shares (equities) are the best option. Check out our articles on index-tracking funds and my featured article on Nutmeg.com to get some ideas of easy ways to invest in stocks and shares.
However, if you want to put money into a cash ISA – even if just for part of it – check out our ISA comparison here for the best deals.