'Huge returns' for ISA savers

Consumers who save in an ISA could increase their investment returns by as much as 126 per cent, it has been claimed.

According to Fidelity International, the extended annual allowance for over 50s has made such accounts even more attractive for those looking to generate the highest returns.

The firm gives the example of a 50 year-old basic rate taxpayer, who places £10,200 into an-ISA wrapped UK corporate bond fund each tax year.

Fidelity explains that if they receive a yearly return of five per cent in interest, they could amass £231,106 by the age of 65, with the investment return of £78,106 shielded from the taxman.

Paul Kennedy, director of tax wrapper and trust planning at the firm, said many people recognise an ISA to be "tax-advantageous", but few really understand just how much money they could be throwing away by saving elsewhere.

He added: "I cannot put it more simply: if you have savings you must consider an ISA. If you pay tax an ISA should be the first place that any non-pensions savings go.

"It doesn't really matter in what you are investing, the nature of the tax regime in the UK is that the taxman is often going to take a slice of your investment return. Use an ISA and he won't."

ISA savers should still be checking for the best interest rates on savings, according to Investec Private Bank.

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2009-10-27 15:01:28 © Moneyextra.com