“ISA millionaires” have rocketed by about 20% in just one year, according to the latest figures. HM Revenue and Customs (HMRC) data reveals that a hefty 4,850 savers had ISA stashes exceeding £1million as of the end of the financial year in 2022, jumping up from 4,070 the year before.
The figures were obtained through a Freedom of Information (FOI) request by the fintech firm, Plum.
On average, these well-heeled ISA millionaires had bagged £1,351,000 by April 2022, while the top 25 fat cats averaged a cool £8,880,000 in their accounts.
But HMRC warned when releasing the data that, each year, some ISA managers may enter records incorrectly, or fail to submit, therefore the figures should be treated as a guide and may not reflect the true number of ISA millionaires.
Rajan Lakhani from the smart money app Plum said: “ISA millionaire wealth continues to grow, even as other savings and investment products lose a little of their shine following recent tax changes. A large part of the ISA’s appeal is the flexibility and liquidity it offers investors.”
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He added: “While only a fraction of savers will be able to amass a million pounds in their ISA, investing even small amounts regularly can add up to a significant sum over time, and go a long way to helping people meet their financial goals. That’s especially the case if you begin your investing journey early,” reports the Express.
Mr Lakhani highlighted the importance of a safety net, saying: “Of course, it’s also important to have a rainy day fund, and a Cash ISA is ideal for insulating yourself from future shocks, like a sudden job loss or poor health, or to use for things you need in the shorter term.”
Shaun Moore, a tax and financial planning whizz at Quilter, has dished out some savvy tips for those dreaming of a one-million pound ISA. He advised: “One key rule of thumb is to make full use of the annual ISA allowance, currently set at £20,000.
“By consistently investing up to this limit in a diversified Stocks and Shares ISA, savers improve their chances of hitting substantial growth targets. Achieving an annual return of around 6% to 8% is often feasible within a balanced investment portfolio, which is significantly higher than the rates generally offered by Cash ISAs.
“Over 24 to 30 years, these higher returns compound meaningfully, making the goal of reaching £1million more realistic.”
The tax guru stressed starting early as “equally vital”.
He explained: “The more time investors have, the more they can benefit from compounding – reinvesting gains to achieve growth on growth. Even starting with modest contributions can yield impressive results over the long term.”
He also recommended the “20% rule,” where folks should try to stash away 20% of their income into investments.
Mr Moore stated: “This may be a stretch for some, but setting aside a consistent proportion of income ensures a growing investment pot over time, especially as earnings increase.”
He further explained, “Our calculations show that someone who is 25 today contributing £10,500 to an ISA each year, getting a 5% average return and paying 1% in fees would reach millionaire status in 40 years. This means they would have over a million pounds in retirement.”
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