The investment community were expecting an ISA cap as the main feature of George Osborne’s budget, so they were as surprised as everyone else by the annuity policy. The budget was greeted with good cheer. Not only did the cap not happen, but the annual investment limit had been raised to a whopping £15k, without the Labour party seeming to notice. What a coup!
So let’s just see how the ISA breaks down. Let’s imagine a baby called Gideon junior comes into this world to a wealthy family, who immediately open a junior ISA, and deposit the maximum £4k per year until he is 16. He then gets an inheritance and he deposits the maximum £15k per year until he reaches the retirement age of 68. How much tax free wealth will he have by that time?
Financial advisers calculate future returns as being either 3%, 6%, or 9%, depending on how optimist the client is, of future returns, or interest rates. Using the 6% figure, Gideon junior would have £107,458 by the time he reaches 16. With £15k a year added, at 6% compound interest, by the time he is of retirement age of 68, his ISA would have grown to £7,811,662. Read the rest of this entry »