How to become an ISA Millionaire

Tim Walker - Head of Brewin Dolphin Exeter 

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”.[1]

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.”

ISA millionaire chart

Year	Annual Allowance Inflation Adjusted	Assumed Performance Total Return 5%         (growth & income)	Rolling ISA Pot With Long Run Performance Assumption of 5%	CGT Annual Allowance Inflation Adjusted
06/04/2013	£11,520	5.00	£11,520	£10,600
06/04/2014	£11,880	5.00	£23,976	£10,900
06/04/2015	£12,177	5.00	£37,352	£11,000
06/04/2016	£12,481	5.00	£51,701	£11,100
06/04/2017	£12,793	5.00	£67,079	£11,378
06/04/2018	£13,113	5.00	£83,547	£11,662
06/04/2019	£13,441	5.00	£101,165	£11,953
06/04/2020	£13,777	5.00	£120,000	£12,252
06/04/2021	£14,122	5.00	£140,122	£12,559
06/04/2022	£14,475	5.00	£161,603	£12,873
06/04/2023	£14,836	5.00	£184,519	£13,194
06/04/2024	£15,207	5.00	£208,953	£13,524
06/04/2025	£15,588	5.00	£234,988	£13,862
06/04/2026	£15,977	5.00	£262,715	£14,209
06/04/2027	£16,377	5.00	£292,227	£14,564
06/04/2028	£16,786	5.00	£323,625	£14,928
06/04/2029	£17,206	5.00	£357,012	£15,301
06/04/2030	£17,636	5.00	£392,498	£15,684
06/04/2031	£18,077	5.00	£430,200	£16,076
06/04/2032	£18,529	5.00	£470,239	£16,478
06/04/2033	£18,992	5.00	£512,743	£16,890
06/04/2034	£19,467	5.00	£557,846	£17,312
06/04/2035	£19,953	5.00	£605,692	£17,745
06/04/2036	£20,452	5.00	£656,429	£18,189
06/04/2037	£20,964	5.00	£710,214	£18,643
06/04/2038	£21,488	5.00	£767,212	£19,109
06/04/2039	£22,025	5.00	£827,598	£19,587
06/04/2040	£22,575	5.00	£891,553	£20,077
06/04/2041	£23,140	5.00	£959,271	£20,579
06/04/2042	£23,718	5.00	£1,030,953	£21,093
Source: Brewin Dolphin
	Actual
Inflation Assumption			2.5%
Total Invested			£508,773
Total Gain			£522,180
Total Capital Gain Assuming 60% of growth is gain			£313,308
Gains Tax Saving over 30 yrs			£292,215