The UK now boasts 4,070 ISA millionaires, according to HM Revenue & Customs (HMRC) figures.
These ISA savers were sitting on pots worth more than £1 million, as of April 2021, according to the data, obtained following a freedom of information (FOI) request on behalf of financial services network the Openwork Partnership.
The average ISA millionaire pot was £1,397,000, with these savers being likely to have their money in stocks and shares.
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The number of ISA millionaires has nearly tripled year-on-year from 1,480 in 2019/2020, according to the HMRC figures - this is around nine times the 450 ISA millionaires recorded in 2015/16 and a long way since 2003 when Lord Lee of Trafford became the first ISA millionaire.
Even more impressively, the 50 top ISA investors were sitting on average pots of £8,509,000.
Isas have the advantage of being ring-fenced from the taxman and investors can pay in up to £20,000 annually.
Setul Metha, head of partnership services at the Openwork Partnership, said: “The ISA has not only created thousands of millionaires, but it has also empowered millions of ordinary investors to build a nest egg alongside their pension.”
How to invest like an ISA millionaire
The news will leave some investors wondering how much time, strategy and investment return it takes to hit the million-pound mark.
“The ISA millionaire status will elude most of us, but it is useful to see how they got there,” says Myron Jobson, senior personal finance analyst at fund supermarket interactive investor. “With an average age of 73 for ISA millionaires on our platform, compared to an average age of 56 for the overall ISA cohort, most will likely have started out with Personal Equity Plans (PEPs), when ISAs were just a twinkle in policymakers’ eyes.”
He adds: “This reminds us that long term wealth creation is about discipline and process. Time in the market, not timing the market and utilising government tax wrappers are a great rule of thumb.”
The length of time it takes to become an ISA millionaire ultimately depends on the amount you can invest and your investment return.
For example, working on the current annual allowance for an ISA (£20,000 for 2023/24) and assuming it stays the same, if you put away the maximum £20,000 a year for 30 years you’d need to enjoy annual investment returns of 3%, excluding fees, to hit £1 million.
If you wanted to achieve the same in 20 years you’d need to enjoy an annual investment return of 7%
And if you wanted to achieve the same in 10 years you’d need to enjoy an annual investment return of 24%.
Investment trusts account for the largest share of the ISA millionaires’ portfolio on interactive investors’ platform - accounting for 42.5% of their portfolio. This is followed by direct equities (39.9%), funds (8.2%), cash (4.2%) and exchange-traded products (3.7%).
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