ISAs – COULD YOU MAKE IT TO A MILLION?
Who wants to be a millionaire? If you would like to join this privileged group, then there is a way you might become a millionaire that doesn’t involve winning the £1m prize offered by Premium Bonds (odds 30,000:1), or taking part successfully in a television quiz show.
Individual Savings Accounts (ISAs) are a great way to invest free of tax on the income and any capital gains arising, and over the last few years the amount you can put in each tax year has risen substantially. A growing number of people are becoming ‘ISA millionaires’ as a result of rising stock market prices and the steady increase in the annual ISA allowance.
Investing for the future
The amount of money invested in stocks and shares ISAs has overtaken the amount deposited in cash ISAs, according to new data released by HM Revenue & Customs. Stocks and shares ISAs held a total of £315 billion in the 2016–17 tax year, compared to £270 billion held in cash ISAs. The number of people subscribing to stocks and shares ISAs also increased in the 2016–17 tax year to 2,589,000, from 2,539,000 in 2015–16, reversing the trend of falling subscribers in the previous few years. If you were able to invest your full ISA allowance in a stocks and shares ISA every year, and if the ISA limit increased by around 2% each year, your investments made an annualised return of 5% after fees, and all your dividends were reinvested, you too could join the elite band of ISA millionaires in around 22 years. Of course, we must underline that this is not guaranteed because the value of your investments can and does go down as well as up.
Every little helps
If you’re not able to put away as much as £20,000 into an ISA, then remember that even smaller sums saved regularly can add up to a tidy sum over the years. Putting £100 a month into your investment ISA for 20 years could mean that if your investments grew at 5% and your dividends were reinvested, you could be looking at a fund of around £40,000. Thanks to sizeable increases in the annual allowance over the last few years, you can now stash up to £20,000 in an ISA in 2017–18. Don’t waste the opportunity.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.