Britain’s most dedicated Isa investors have amassed pots worth more than £11 million each, taking on Britain’s largest pension pot.
Britain’s 25 Isa investors have built up an average fortune of £11.6 million over 34 years, according to a Freedom of Information request from asset manager RBC Brewin Dolphin.
In fact, some of the Isas will be worth more than £11.6 million.
Such a large fortune could only be made by investing in stocks and shares, and investors should earn an average annualized return of 18.9 percent over a 34-year period.
Golden returns: There are 25 Isa investors with pots worth an average of £11.6m each
How did they do it?
Isas were introduced in 1999, replacing their predecessor Personal Equity Plans (PEPS), which was launched in 1987 by then Chancellor Nigel Lawson with an annual allowance of £2,400.
PEP investors were allowed to put their money in the new tax wrapper.
Jason Hollands, director of stockbroker Best Invest, said: ‘Isas turn 25 on April 6, so anyone with 34 years of Isa savings should also have had investments made in PEPs.
‘PEPs first became available in 1987, so together that is 37 years of allowances so far.’
He adds; ‘Each year there were two annual PEP grants, a general PEP (which eventually amounted to £6,000) and from 1991 an additional Single Company PEP of £3,000 (which could only be invested in an individual UK company share).
‘Together the PEP allowances amounted to £9,000 (up from the original Isa allowance of £7,000). PEPs were merged into Isas on 6 April 1999.’
As of 1987, an investor would have needed around twenty years to reach £1m with contributions of around £127,200, assuming an annual return of 18.9 per cent after fees.
It would have taken another eight years to reach £5 million with contributions of around £215,520.
According to RBC Brewin Dolphin, the figure of £11.6 million would have been reached after 34 years with a total contribution of just £310,760.
Rob Burgeman, investment manager at RBC Brewin Dolphin, said: ‘We’ve been following the fortunes of the country’s Isa millionaires for 20 years, and our research tells us they all have one secret in common.
“They all built their fortunes through stock investments.”
Jason Hollands said: ‘Given that UK shares, as measured by the MSCI United Kingdom Index, delivered an average annualized return of 7.4 per cent over this period, and global shares delivered an average annualized return of 8.2 per cent, those who amassed such amounts certainly were. I don’t use index trackers and must have made some very smart – or possibly lucky – investments over the years.
‘In reality, it is virtually impossible to achieve such high returns on a consistent basis, and anyone holding investments for such long-term skills is unlikely to have bought and held the same funds or trusts.
‘During the time of the PEPs, investors were limited by how much they could invest outside Britain.
“It’s more likely that they had some serious successes along the way and that the gains were locked up, perhaps in individual stocks.
“For example, they may have done well during periods like the dot-com bubble and made sure they jumped out before it burst.”
Rob Burgeman said: ‘An annualized return of almost 20 per cent is substantially more than comparable indices, so it’s safe to say this was unlikely to be achieved through investing in an index tracker.
“Instead, it could be an incredibly successful trader, or someone who has invested in their own company or smaller growth stocks. In any case, while successful, it has undoubtedly been a higher risk strategy.”
Number of Isa millionaires rising
The number of Isa millionaires has tripled between 2020 and 2021. The latest figures from HMRC show that a record number of 4,070 investors had an Isa worth £1 million or more during this period. The average Isa millionaire has a pot of £1.39 million.
Lord John Lee from Trafford – a stock picker expert – became the first Isa millionaire in 2003, reaching the seven-figure milestone with contributions of £126,200 paid in 16 years. Its annualized return during this period was 21 percent.
Investment platform AJ Bell says its Isa millionaires tend to invest in individual shares rather than funds, with 75 per cent of their portfolios in shares, including investment trusts.
Dan Coatsworth, investment analyst at AJ Bell said: ‘Dividend reinvestment has historically been a way to boost returns in a portfolio Isa due to the compounding benefits.
“By using dividend money to buy more shares, an investor can increase his stock ownership without investing more capital.”
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