The traditional routes to becoming a millionaire – marriage, inheritance, the lottery or a genius business idea – might seem a bit fanciful to many of us but, with ISA season upon us, reports suggest that there may be many ISA millionaires in the UK already. In fact several ISA investors at Brewin Dolphin, through judicial investment directly in equities, have amassed ISAs worth over £1 million. Brewin Dolphin has 15 clients with ISAs worth millions each and 40 with ISAs over £750k; though these clients pursued a direct equity strategy and were certainly prepared to take risks. The total value of all Brewin Dolphin ISA portfolios is over £4.7 billion.
Analysts at Brewin Dolphin have calculated that it could take less than 30 years for anyone using their ISA allowance before the end of the tax year and annually thereafter to achieve millionaire status. With conservative assumptions on growth and income (5% combined) and inflation (2.5%), 2042 would see a total fund of £1,030,953 representing a gain of £522,180 on a total investment of £508,773. The total tax saving over this period would be an impressive £292,215 and a £1 million tax free fund for life.
Tim Walker, head of Brewin Dolphin Exeter said, “ISAs and Peps have been such a valuable savings medium over the past 27 years and we advise clients never to miss a chance to use their allowance, either alone or as a tax-free zone within their portfolio. The total investable amount in ISAs and their predecessors PEPs over the last 27 years now stands at £200,560k”.
Tim Walker said, “Saving in a tax efficient wrapper remains one of the most compelling ways of realising your long term financial ambitions. During its life, the WMA Balanced Total Return index has returned compound annual growth of 8.5% - despite the so-called lost decade for equities after 2000. Even now, with the FTSE paying seven times as much income as bank deposits, we have assumed a more conservative 5% return and still an investor using their full ISA allowance each year could be a millionaire in 27 years with no tax to pay on their gains. The importance of compounding, and the benefits of tax efficient saving, can deliver life-changing wealth to those who seize the opportunity.”
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