Why it's nifty to be fifty, but not for long.......

Life is like a box of chocolates apparently. Well actually Forrest Gump’s dear Ma was wrong, because it’s actually like a stick of rock with many layers of contrasting flavours.

In our twenties we enjoy the freedom of limited responsibility and start our careers with high hopes of making a difference in the world. In our thirties we swop that freedom for nappies, sleepless nights and big mortgages. Forty brings teenage children and normally some kind of mid life crisis involving a leather jacket, a motorbike and a badly misjudged goatee. When we get to fifty however, life is supposed to level out. The kids have left home or are at the tail end of their education and the term left on the mortgage should be in single figures.  There is a glimmer of light at the end of the tunnel and all thoughts of making a difference in the world have been replaced by a simple desire to just get through life alive.

Many quinquagenarians may however be feeling a little left out at the moment. It seems that every other age group is being thrown some sort of financial lifeline to help them through the economic downturn.

Twentysomethng’s have had an increase in the stamp duty threshold to assist first time buyers. Thirty & fortysomethings are enjoying the lowest interest rates in history, which is helpful as they have the largest debt liability in history. It’s not even as though you get a bus pass and a winter fuel payment until you are in your sixties.

Finally however, the hand of mercy has been extended to all people who can claim to remember William Hartnell as Doctor Who. Alistair Darling has extended the ISA allowance for those who will be aged fifty or over before 5th April 2010. The Cash ISA allowance has been increased from £3,600 to £5,100 and the Stocks & Shares allowance from £7,200 to £10,200.

ISA stands for Individual Savings Account and they incur special tax advantages. Normally, income from savings will pay tax at either 20% or 40% depending on whether the investor is a basic or higher rate taxpayer. Growth on investments is also charged as a capital gain at a flat rate of 18%.

It is best to think of an ISA as a protective blanket that can shield part of your savings from the beady eyes of the taxman. Each year you are granted a new allowance that means that the blanket can be extended over more of your investments. The key thing to remember is that if you don’t use your allowance in the tax year, then it will be lost forever. This means that if you are over fifty, you only have until April to use your increased allowance for this tax year.

The ISA allowance comes in two parts. The cash ISA element only covers cash based deposits and the Stocks & Shares ISA covers non cash based investments. Confusingly, the Stocks & Shares ISA is not limited to Stocks and Shares. It can actually hold many types of investment including fixed interest funds, corporate bonds and commercial property as well as equity based funds so there is no excuse not to use it.

If you are in your fifth decade on this mortal coil then your thoughts may also be wandering towards the possibility of retirement. These may either be realistic thoughts based on sound financial planning or a harebrained scheme born of desperation as you gaze wistfully out of the office window. In any event, under current legislation you may take the benefits from your Personal Pensions from age 50, but this is also about to change.

From 6th April 2010 the earliest you may take your benefits will be increased to age 55. Therefore if you are currently aged between 50 and 55, you only have five months left if you wish to take any pension benefits, including the tax free lump sum. Failure to do so will mean at least a few more years of window gazing.