ISA Calculation

ThankYouAndEnjoy!

Hello

Could someone please tell me how much 41 years of Cash ISA investments would be worth please. Assuming the following

£3000 per year, each year, transferred in on new tax year date
5.8% interest per annum

I have a figure, not sure if it correct tho! (used excel) - are/is there a calculator out there that would work this out for me??

Thank you

masonic

I make it just under £500,000. For calculations like this, IMHO, Excel is the best thing to use.

ThankYouAndEnjoy!

Thankyou

I got £497k so seems i was working it out correctly.

Im trying to work out the best way to fund for retirement. Got a few options but this 1 seems to guarantee a return (although im a complete novice in pensions!)

Heading over to the pensions board now

cheerfulcat

Be aware, though, that even at a fairly low rate of inflation - say 4.5% - after 41 years your £500,000 will be worth around £75,000 in today's money.

ThankYouAndEnjoy!

Hello

Thankyou for your post, however im a little confused by your numbers?

If im investing £123k (£3k x 41) at 1% above the rate of inflation (based on your 4.5%), how will my £123k investment reduce to £75k??

How did you work this out?

Thankyou

masonic

You have to consider that the £3000 that you are putting in each time also decreases in value over the years because of inflation. In fact, £3000 in 41 years time would only be worth £475 in todays money using CC's inflation rate.

Edit: In other words, in your spreadsheet, you not only need to factor inflation into your balance after each year by multiplying by (1-(inflation/100)) i.e. 0.955, but you need a third column for your annual contribution, which you have to multiply by that same value each year.

kingmonkey

ISA cash allowance increases next year to £3600

but i agree with £497,469.38

brasso

For very long-term investments like this, you may want to consider equity ISAs rather than cash. Cash interest is dead reliable, but the rate is relatively low.

I'd be interested to know what a steady annual amount invested in say a FTSE tracker over the past 41 years would amount to now, but a lot more than cash, I'm certain!

debbie42

Are there any guarantees that ISAs will be around for that long?:rolleyes:

cheerfulcat

ThankYouAndEnjoy! wrote: »

Thankyou for your post, however im a little confused by your numbers?

If im investing £123k (£3k x 41) at 1% above the rate of inflation (based on your 4.5%), how will my £123k investment reduce to £75k??

As masonic has pointed out, the value of your £3000 contribution drops continually as well. In order to keep up with inflation you would need to put more into your ISA every year but of course the ISA limits have not changed in 10 years...

Cash is not a good home for long-term money.

ThankYouAndEnjoy!

hello

ok, still do not understand (sorry)

if i break this down into 1 year ....

£3000 x1.058 = £3174 (Capital + Interest(Tax Free))

£3174 x0.955 = £3031.17 (Capital + Interest - Inflation (taken @ 4.5%))

Assuming this trend of Interest and inflation rates remain constant over the next 41 years, then surely i have made a gain on my Captial Investment??

Am i looking at this too simplistically? -