ISA Case Studies

ISA Case Study 1

Dermot Shaw and his wife, Mary Shaw, decide to save the maximum permissible amount into an ISA of £10,200 per year each, a total of £20,400. They are both aged 35 and hope to retire at 60 when they want to take a tax free income from their ISA plans. The result of saving £20,400 for 25 years in an ISA, assuming an overall return of 7% per annum, will generate a total tax free ISA fund for Mr and Mrs Shaw of over £1 million. Such a sum, invested into a portfolio of good quality fixed income investments on an average yield of 5%, would generate a tax free income of £50,000 a year.

ISA Case study 2

Andrew Bingham starts an ISA at the age of 25 and makes the maximum ISA contribution of £10,200 per annum for 8 years. He then marries and decides to buy a house for his family. He cashes in some of his ISA and uses this for the deposit on the family home He continues to pay £10,200 per annum into his ISA until he is 50 when he again partly encashes his ISA to pay school fees for his two children. At 65 Andrew retires and supplements his pension with a tax free income from his ISA.

This case study serves to demonstrate how flexible an ISA can be over an individual's lifetime. At any point it can be surrendered in part or in full. It can also provide a tax free income whenever this is needed.