Investments  

Monthly Isa contributions generate £11.5k more for investors

Monthly Isa contributions generate £11.5k more for investors
 

Investors who contribute to their Isa each month have saved up to £11,500 more than those who have left it to the last day of the tax year over the past decade, research has shown.

Quilter looked at data for the 10 years to April 5 2022, using the performance of the average IA Global fund.

The research showed that a more cautious investor would also benefit from monthly contributions over one lump sum saving.

If the investor put their funds in an IA Mixed Investment 40-85 per cent shares fund, the extra savings would be £4,801 over the decade, and the lowest-risk investors in the 0-35 per cent shares sector would be £2,014 better off.

 Average returns monthly vs annual Isa investment (IA Global sector)

Tax year

ISA contribution

Investing monthly value as at 5th April 2022

Investing late (5th April) value as at 5th April 2022

Difference

2012/13

£11,280

£31,674

£28,135

£3,539

2013/14

£11,520

£27,362

£26,022

£1,340

2014/15

£15,000

£32,907

£29,841

£3,066

2015/16

£15,240

£31,926

£31,422

£504

2016/17

£15,240

£27,699

£24,334

£3,364

2017/18

£20,000

£30,641

£30,760

-£119

2018/19

£20,000

£29,209

£27,899

£1,309

2019/20

£20,000

£26,596

£31,369

-£4,774

2020/21

£20,000

£24,664

£21,527

£3,137

2021/22

£20,000

£20,178

£20,000

£178

 

Total

£11,546

Source: Quilter

Rick Eling, investment expert at Quilter, said there is always a strong emphasis on the end of the tax year and for good reason. 

“Isa allowances operate on a ‘use it or lose it’ basis, and we want to make sure everyone is maximising the amount they save and invest tax free.”

Eling added the “buzz” around the end of the tax year can often mean people neglect the beginning of the new one and the benefits of using the entire year for an Isa allowance. 

Investing monthly also allows investors to benefit from “pound-cost averaging” where they drip feed money into the market and protect against any volatility that may be present.

“Despite the ups and downs of the stock market, ‘time in the market’ remains one of the most important factors for the growth of a portfolio,” he said.

“This year will undoubtedly be harder for some as the cost of living rises, but people need to make sure they continue to invest for the long-term to give them the best opportunity to beat the rate of inflation. 

“Starting as early as possible and investing regularly will help provide an extra boost in this challenge.”

sally.hickey@ft.com