Make your money grow: a guide to savings and ISAs

Posted on January 21, 2015 by Eleanor McKenzie
Dropping money into a savings jar

The expectation that retirement would happen at 60 or 65 belongs to previous generations. Pensions were more straightforward and the choices of savings accounts were also pretty limited for the majority of people. Now we face an array of options that could baffle a boffin!

Whatever our employment, or pension, or circumstances; in our 50s and beyond we need our money to work harder for us, at the same time as we aim to work less. We are receiving pensions at a later age and we are likely to live longer, so you can see that there’s a need to make our cash stretch over a longer period of time than earlier generations could ever have guessed. If you don’t know when you’ll receive your government pension; here’s the State pension calculator for your convenience.

One of the keys to getting the most out of your money in your retirement is by saving it; so we thought that the beginning of 2015 is an ideal time to bring you a guide to the range of savings products that are currently available.

Boost Your State Pension

Boosting your state pension is one way of saving. It’s easy to discover on the government website above what you’re likely to receive and what adding to the pot will give you in terms of income when you’re at retirement age. This is considered particularly beneficial for people who are, or have been, self-employed, or anyone who may have missed National Insurance payments due to a host of other reasons. Deferring collecting your pension until a later date is another way of increasing your state pension fund. For example, Martin Lewis, who is also known as the Money Saving Expert, says that if you delay taking your pension for a year after you qualify to start it, you can get an additional 10.4%.

Research Savings Accounts

It’s also worth checking that your savings account is the best one available. Martin suggests that you treat your savings account like a job. What he means is that it requires the kind of dedicated research you would put into finding the best quotes for a business supplier, to give you an example. He also says that you should get rid of any debts before you start putting your cash in a bank savings account, because this will make sure your savings efforts aren’t eaten into by the cost of debt. Especially, as interest rates on  debts are usually higher than the rate you’ll receive on savings.

Investigate ISAs

Look into buying an ISA. An ISA is the tax efficient way to save, according to the experts. If you put your savings into an ISA, you’ll pay less tax and therefore increase your savings pot. Before July 2014, there was a limit on how much money you could put into an ISA as cash or shares. Since that date, this rule has been relaxed, although the actual sum saved is still limited to £15,000. This will increase to £15,240 this April. Now you can choose the way you split your ISA sum between cash and shares. Indeed, you may not want to split it at all and simply choose one or the other.

It is probably best to discuss your ISA options with a personal financial adviser. That’s because getting the most out of an ISA’s tax advantages isn’t always straightforward. For example, if you choose a cash ISA, there is no tax to pay, but higher rate tax payers may benefit from choosing a stocks and shares ISA. An adviser will also be able to explain the most efficient way of withdrawing money from an ISA: according to Martin you should never withdraw money from an ISA yourself; you should do it via an ISA provider if you want to avoid tax.

The Range of Alternatives

There are a myriad of other ways to make your savings work harder for you. The Top 10 Ways to Improve the Return on your Savings, according to financial journalist Patrick Collinson, includes buying corporate bonds for household names such as Skandia Supermarkets or Enterprise Inns, or fixed rate bonds from your bank, as long as you don’t need the cash for a few years. There are government Gilts, and there is always the risky world of the stock market.

Interestingly, one old faithful still makes the Top 10 list, and that’s Premium Bonds. Somewhere I may have a few of those that my granny gave me. But, while they are safe, if the savings experts are right, Premium Bonds won’t spell savings success for any of us. Savings is a sophisticated business these days, and it’s time we all became savings savvy!

by Eleanor McKenzie

Eleanor McKenzie is a Northern Irish writer with a passion for art, literature, and red wine. She's worked at advertising agency JWT, edited a journal for a European social policy think tank and tried to teach teenagers the difference between "there" and "their". Being 50+ has not significantly changed Eleanor's life, although she finds it a handy excuse when she wants to avoid anything too energetic.