Investors who consistently maximise their ISA allowance at the beginning of the financial year could accumulate significantly more wealth than those who delay, according to new analysis.
Research by InvestEngine suggests that “early bird” investors could be approximately £83,000 better off over time.
The study modelled a scenario where a person invested the maximum annual amount into a Stocks and Shares ISA at the start of each financial year since 1999, tracking global equities.
This approach could have resulted in a pot valued at around £1,277,963.
In contrast, an investor making the same contributions at the end of each year would have accumulated approximately £1,195,127 – a difference of £82,836, or 6.93 per cent.
Investment returns are not guaranteed and can fluctuate based on individual circumstances, chosen funds, and broader market conditions. The value of investments can decrease as well as increase.
Individuals considering their investment options may wish to seek professional financial advice.
The annual ISA allowance, currently £20,000, has varied throughout the years.
InvestEngine said that by investing at the start of the tax year, investors can make the most of their tax-free allowance early on and their money has more time in the market to potentially grow and compound.
For investors who are unable to save big sums of money in one go, there can still be advantages to investing early in the tax year.
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InvestEngine’s modelling indicated that those who invested £1,000 at the start of every tax year since 1999 could potentially have £129,135 in their pot, compared with £122,536 who invested at the end of tax year – a difference of £6,599.
Andrew Prosser, head of investments at InvestEngine, which is offering bonuses for Isa and sipp (self-invested personal pension) transfers subject to terms and conditions, said: “In both the short and long-term, investing early in the tax year can make a significant difference to a savers’ investments.”
He added: “Our own data from the end of the tax year shows 10 per cent of customers waited until the last week to invest a combined £33 million.
“But the first day of the new tax year (6 April) has already seen customers invest £9 million at a higher average amount than last year – and on a bank holiday – showing resilience in the face of volatility and ensuring their investments have as much time to grow.”
