There are currently 3,180 ISA accounts in the UK with £1million or more, according to analysis by InvestEngine. This is a staggering 2,150 more than there were 3 years ago and another 7,000 people are on the brink of earning this title as their accounts are worth over £750,000. A further quarter of a million people have £250,000 or more in their ISA.
The tax-free savings vehicle has long been a go-to product for people saving or investing large sums of money.
But how exactly do you join the ranks of ISA millionaires? Can you reach that level with a cash ISA and how much do you need to start out with?
Experts at InvestEngine delved into the details thanks to their Investing calculator, revealing how you could become an ISA million by 2043 or 2063 depending on your method of choice.
Andrew Prosser, Head of Investments at InvestEngine, explained that people are far more likely to reach millionaire status with a stocks and shares product than just a normal ISA cash savings account.
He shared the maths behind this: “Someone who has put the maximum in a cash ISA every year since they were launched in 1999 would be at around £275,000 – a great sum, but well short of millionaire status.”
Based on the average return rate over the last decade, InvestEngine revealed that maxing out your ISA allowance in a stocks and shares account from today could make you a millionaire in 2043.
In contrast, doing the same with a cash ISA will only earn you millionaire status by 2063. However, with investments capital is always at risk so people may lose more than they invested, a risk that isn’t present with cash ISAs.
Currently, the ISA annual allowance is £20,000 but it’s important to note that this is per person and not for specific accounts, so having multiple ISA accounts doesn’t mean you can add £20,000 to each.
There are some other ways to maximise your ISA products and potentially nab that millionaire status earlier.
The expert added: “While not everyone will be able to put away this type of money each year, it shows the importance of thinking about the long run with investments and the power of compounding.
“Getting started early each year, even with just small amounts, and not leaving investing until the end of the tax year, creates the potential to grow large sums for later in life.”
