Savvy savers could boost their funds by £95,000 if they take advantage of the cut in National Insurance (NI) announced in the autumn statement this week.
Wealth firm True Potential calculated a person on the national average salary of £32,963 a year will save £448 as the NI main rate is falling from 12 percent to 10 percent from January 2024, and this amount could grow to a large sum if invested carefully.
If a person’s tax savings were invested in monthly instalments into a stocks and shares ISA at the average 7.75 percent rate, this would grow to £2,727 in five years’ time and then to £52,895 after 30 years.
If a person aged 30 put aside the amount until they reached the age of 67, they would have total savings of £94,984 to got towards their retirement funds.
Neil Rayner, head of Advice at True Potential, said: “The decision to cut National Insurance will be welcomed by many across the country who’ve been struggling with their tax burden.
“By reducing National Insurance, the Government is putting more money back into the pockets of working Brits. It’s a positive stride towards stimulating economic activity and enhancing the financial wellbeing of the average Brit.”
A person can save up to £20,000 a year into ISAs. Savers should note with stocks and shares ISAs, as the funds are in the form of investments, their value can go down as well as up.
ISAs come with the benefit of being tax free so a person does not pay any tax on any interest or investment growth, or on any income they derive from an ISA.
Chancellor Jeremy Hunt also announced several changes to ISAs to provide more options for savers in his autumn statement.
From April 2024, savers will be able to subscribe to multiple ISAs of the same type each year and to partially transfer ISA funds between different providers.
Stephen Sillars, savings and investment editor at wealth app Chip, said: “For savers, ISA reform was a diamond hidden in the rough of the Autumn Statement’s accompanying 120-page document.
“Important changes were announced that will take effect from April 2024. Amongst other things, savers will now be able to contribute money to more than one of the same type ISA in the same tax year – something that wasn’t allowed before.
“They’ll also now be able to make partial transfers of ISA savings they’ve made within a tax year between different providers, which is another plus.”
The Bank of England held the base interest rate at 5.25 percent in its latest decision with many savings providers still increasing their rates on ISAs and other accounts.
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