Keep it in the family to save up to £3.3m tax efficiently

With the tax year end only days away, new figures from low-cost investment platform provider AJ Bell highlight the enormous saving potential of families exploiting their pension and ISA allowances - they show that by consistently using these tax efficient savings vehicles a family of four could accrue £3.3m over 18 years.

The spotlight on the saving potential of using up ISA and pension allowances comes after the Government announced a consultation into allowing the transfer of assets between discontinued Child Trust Funds (CTF) and their replacement, the Junior ISA (JISA).
 
Billy Mackay, AJ Bell Marketing Director, says: "The government's consultation into allowing CTF-JISA transfers is much-needed and timely because many children's savings are locked into effectively defunct CTFs. Allowing CTFs to switch into Junior ISAs should benefit these children. Also, with more people now managing all of their assets on a single investment platform this makes sense. As our figures show, the potential of making use of the mainstream tax-efficient savings vehicles available to families is considerable."
 
The maximum amount a family of four can save in the 2012/13 tax year is £136,960, which incorporates the pension and ISA allowances of two adults and two children. In the 2013/14 tax year this rises to £137,680 because the adult ISA limit increases by £440.
 
If there were no further changes to ISA and pension allowances over the following 17 years £3.319m could have been saved, with investment growth of 3%.
 
Mackay continued: "It may surprise some people to learn that as a family they could potentially save more than £3.3m in the time it takes a new-born child to reach 18.
 
"While it may not be in the grasp of most families to use up all of their pension and ISA allowances every year, these numbers simply highlight their potential. Saving far smaller amounts could still result in highly significant sums over a number of years, particularly in light of the fact we have only factored in a relatively low rate of investment growth in these figures.
 
"The tax benefits of pensions and ISAs are considerable and anyone saving for themselves, their children or other family members, should probably focus on these products first - depending on their specific circumstances and goals."