Bloomsbury Financial Planning

Some 21m people in Britain are aged 50-plus, and 11m of them have already squirrelled away money into tax-free Isas. If they all used their full top-up, it would see them stash away a further £33 billion out of the Revenue’s reach.

The amount that you can save in a cash Isa will also go up from £3,600 to £5,100 on October 6, or £16.5 billion if all 11m took advantage, figures from Fidelity, the fund manager, show.

However, research undertaken by Lloyds Banking Group for The Sunday Times found that more than three-quarters (77%) of adults don’t understand or are unaware of the forthcoming changes.

You don’t need to put your top-up into the same fund as long as you stay with the same provider, for example. So if you invested in the M&G Corporate Bond fund earlier this year, as many investors did, you could now put your extra £3,000 into an equity fund such as M&G Recovery.

However, if you’re on a fund supermarket, such as Fidelity Funds Network, you can split your allowance between as many different fund providers as you choose.

The stock market has rallied an extraordinary 21.5% since the start of the tax year on April 6, but only a tenth of the 4,000 adults surveyed by Lloyds said that they would commit new money to the stock market. This echoes the views of many of our experts, who are taking a more balanced approach with their Isa top-ups.

Geoff Tresman at Punter Southall Financial Management, an adviser, said: “Many analysts believe the markets have raced ahead at too fast a pace and that the underlying economic conditions do not justify such confidence.

“I feel a correction will happen over the next few months and investors would be better advised to keep their powder dry. It is, however, important the additional allowance is taken prior to the end of the tax year, otherwise it will be lost.” Your £3,000 could be worth nearly £12,000 in 20 years assuming investment growth of 7% a year — and free from capital gains and income tax — figures from Bloomsbury Financial Planning, an adviser, show.

Jason Butler at Bloomsbury said: “If you only save tax at 20%, your fund would still be worth £2,700 more compared with investing outside an Isa.”

In spite of fears earlier this year that some fund management groups might not be able to accept Isa top-ups, all the big fund groups that were contacted by The Sunday Times — including Fidelity, Jupiter, Schroders, Neptune and Artemis — said that they would have no problem accepting the cash.