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Whatever your age, an ISA can help you plan for the future

By Luton On Sunday  |  Posted: December 20, 2012

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Saving for your retirement with an ISA at the bottom of your priority list when you’re in your 20s. You’re probably far more concerned with going out with your friends. Getting your teeth into your first job. And possibly even thinking about getting onto the property ladder.

But if you’re under 30 it seems you can’t really afford to ignore saving for your pension. Figures from the 2012 budget predict that people graduating from university this year won’t be able to draw their state pension until they’re at least 71 years old.

So if you want to help towards your retirement – and make sure you have the finances to live comfortably – it makes sense to start setting money aside for your future.

A cash ISA is an individual savings account that gives you tax-free interest on your money. So, assuming you’re a basic rate taxpayer, instead of paying 20p on every £1 you earn in interest, you get to keep it all.

Every tax year, which runs from 6th April to the 5th April, you get a tax-free cash ISA allowance – which currently stands at £5,640 for the 2012/13 tax year. You can pay in up to the maximum, but no more during each tax year. While the interest may vary on different cash ISAs, if you go for a fixed rate one, the longer you can leave your money untouched, the better the rate of interest will generally be. But the tax treatment will depend on your individual circumstances and may change.

There are many cash ISAs out there. Some have a fixed or variable rate of interest. Others you can dip in and out of if you want extra flexibility. And there are even ones exclusively for online. So it’s worth looking around to find the best cash ISA for you.

You can also set up a standing order with some cash ISAs in order to transfer money quickly and easily from your current account. And while you make the most of life now – whether that’s going to university, jetting off to exotic countries or starting a family – you could also slowly but surely be building a nice little savings pot, to help you live comfortably when you do eventually retire.

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