ISAs  

Investors urged to start saving into Isas early

Investors urged to start saving into Isas early

Investors scrambled to contribute to their Isas towards the end of the last tax year but research has shown they would benefit from contributing early in the year instead.

According to Hargreaves Lansdown, a contribution was made every eight seconds between 11pm and midnight last Friday and the last three days of the tax year were the firm’s busiest days ever for its mobile app.

Similarly, the final Isa investment at Bestinvest came in at 11.57pm while another Isa account was opened just six minutes before the clock struck 12.

Sarah Coles, personal finance analyst at Hargreaves, said: "This was the year of the Cinderella Isa, with an impressive midnight dash to beat the deadline.

"Every year, one in six people say they tend to invest at the last-minute, but this year the trend was particularly striking."

Chief commercial officer at Bestinvest, Lee Dooley, said last Friday (April 5) night was no different to any previous years with many investors investing up until the final stretch.

But according to the Share Centre it makes more sense to invest early in the year and make the most of the 12 months of interest and dividend earnings.

Share Centre analysis on the FTSE 100 based on returns over a 10-year period ending in the tax year 2018 showed investors could also benefit from contributing to their Isa on a monthly basis. 

By drip feeding money into the market, investors can take advantage of pound cost averaging, for instance, meaning investments on a regular basis average the price an investor pays for the total investment over time.

Just last month, Nutmeg launched a general investment account with a 'drip-feed' feature for savers.

Andy Parsons, head of investments at the Share Centre, said: "If you have money to save in your Isa allowance, there is no point in hanging around.

"Instead, take advantage of the new tax year’s allowance straight away and leave your investments to accumulate.

"Remember that time is money when it comes to investing. There is a whole year of potential returns to be had. Simply setting up a direct debit to invest regular amounts deposits the money for you and will allow you to sit back and let your investments do the hard work."

Ms Coles agreed the beginning of the tax year was by far the best time to get started on a new Isa allowance.

She said: "Getting it sorted now means your investments will be sheltered from tax straight away, you’ll get dividends immediately, and your money has longer to grow. 

"It also provides the opportunity to set up regular investments each month, which not only spreads the cost of an Isa but also avoids any risk associated with market timing."

Mr Dooley added: "Not only does investing earlier in the tax year remove some of the pressure to make a hasty decision, it also means your hard earned cash is put to work for longer.