According to Fidelity International, Early Investment in an ISA Has Made as Much as £17,000 Difference to Investing Late

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Investing early leaves more time for the miracle of compounding to take effect. Customers can invest up to £10,200 tax free if they are over 50 years old.

compound interest table

compound interest table

Compound interest has been around for centuries and has been considered to be the 8th wonder of the world by the likes of Albert Einstein*. This concept is similar to investing early into an ISA , it can make a substantial difference to a customer's investment pot, says Fidelity International.

Compound interest is, in essence, the concept of earning interest on your interest. So, each year an investor earns interest on both their original capital and the interest from the first year and so on. The massive difference in returns compared with taking out the interest is the miracle of compounding.

The key to compounding is investing as early as possible as the longer the benefit is in play the bigger it can become. The benefits of saving early in life can be greatly magnified by compounding.

Compounding can be used in terms of investing early within an ISA. For example, an over 50 ISA investor could be considerably better off investing at the beginning of December than if they invested in April, even as little time as six months can make a difference. Fidelity’s analysis** placed the full PEP or ISA allowance into the FTSE All Share index and FIF Special Situations Fund over the last 15 years. While past performance is not a guide to future performance, it is easy to see from the table the difference in investment growth.

Rob Fisher, Head of UK Personal Investments at Fidelity International, comments: “The proof is in the pudding. It can definitely be worthwhile investing sooner rather than later and who am I to argue with Albert Einstein? We have already seen many investors utilising the extra £3,000 ISA allowance, with our October ISA sales up 47% on the same time last year. The ISA is the most tax efficient way to save outside of a pension, and the increase in allowance is the biggest positive move the Government has made in over a decade towards saving, actually since they introduced the ISA. It is not an opportunity to be missed and investors should consider starting their returns compounding now.”

ISA offer:

Fidelity is offering investors an extra incentive to review their portfolios sooner rather than later. From 6th October 2009 to 18th December 2009, investors who review their portfolios and, as a result, choose to transfer their existing ISA(s) into a Fidelity fund will receive up to £300 cash-back depending on how much they transfer (terms and conditions will apply***). The minimum eligible investment to qualify for this offer is £5,000 which will generate cash back of £15. There will also be no initial charge payable for self-directed investors.

In addition, people choosing to make a new ISA investment into a Fidelity fund will save up to £350 on their £10,200 ISA contribution by investing online at no initial charge. They will also be eligible for the same cashback incentive, which could be as much as £30 on a £10,200 ISA investment.

Notes to editors:

*Source: http://successnet.org/articles/angier-8thwonder.htm
**Source: Fidelity analysis, which is based on monthly valuations, placed the full PEP or ISA amount into the FTSE All Share Index and FIF Special Situations Fund on the nearest possible dates to 1 December and 6 April in each year (namely ‘early’ on 1 December and ‘late on 1 April) since 1994. The analysis covers fifteen years in order to avoid some of the more complex rule changes throughout the history of PEPs and ISAs, particularly the move from calendar year to tax year investment deadlines, which would render ‘early’ and ‘late’ definitions less meaningful. Source: Fidelity as at 11.11.09, bid to bid, UK ISA, based in
sterling, calculation indexed.

***Campaign Details

  •     Investors receive a £3 cash-back payment on every £1,000 transferred or invested into Fidelity funds via a Fidelity ISA.
  •     The minimum eligible investment to qualify for the offer is £5,000.
  •     There is no maximum amount that can be transferred or invested but the offer is subject to a maximum of £300 payout and restricted to one per customer.
  •     The cash-back offer is only for investments in Fidelity Funds and excludes Fund Partner ISAs, ShareNetwork ISAs, ISA deals into ISA Cashpark, MB UK Index and MB Cash ISA, Investment Trust ISAs and switches.
  •     Investors taking up the incentive or placing new ISA investments online into Fidelity funds do not have to pay an initial charge.
  •     Investors will save up to £350 on a £10,200 contribution into their 2009/2010 ISA by investing online at no initial charge.
  •     The cash-back is paid directly to the investor
  •     The offer is only eligible for lump-sum deals or transfers
  •     The offer applies to all previous year ISAs that are transferred to Fidelity or initial investments into 09/10 tax year ISAs
  •     The campaign which is open to new and existing Fidelity ISA holders will run from 6th October 2009 to 18th December 2009

FIL Limited (“FIL”) and its subsidiary companies serve the major markets of the world by providing investment products and services to individuals and institutional investors outside the US. The value of tax savings [and eligibility to invest in an ISA] will depend on individual circumstances and all tax rules may change in the future.

For further information, please contact:

Ali Boyle    
Fidelity International
01737 887 881

Joanne Macklin
Fidelity International    
0207 961 4361

Press office address: Fidelity International, Kingswood Place, Millfield Lane, Lower Kingswood, Tadworth, Surrey, KT20 6RP

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Judith Lewis

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