Rapid increase in ISA millionaires seen over a three-year period
In the latest Autumn Budget, Chancellor Rachel Reeves did not impose a lifetime limit on Individual Savings Account (ISA) savings or balances. However, there are ongoing discussions about potentially limiting cash ISA deposits within the existing annual allowance framework.
As of now, the annual ISA subscription limit stays at £20,000 until 5 April 2030. The Junior ISA (JISA) and Lifetime ISA (LISA) limits remain unchanged at £9,000 and £4,000 per year, respectively.
The Chancellor is considering proposals to reduce the amount one can put into cash ISAs. This would not affect the total £20,000 annual allowance across ISAs, aiming to encourage more long-term stock market investing rather than just saving in cash ISAs.
According to recent reports, there are about 22 million people with an ISA, with their total market value worth £725 billion. The investment giant Vanguard has seen a 43% increase in the number of clients using up their ISA allowance.
The number of ISA millionaires has significantly increased over the past few years. If the trend continues, those who put away the maximum amount into a stocks and shares account could be an ISA millionaire by 2043. Eight years ago, there were only 570 ISA millionaires, and three years ago, this number grew to 1,030.
Investing consistently each year, even with small amounts, and not leaving it until the end of the tax year, creates the potential to grow large sums for later in life. Over the past decade, the average annual return on stocks and shares ISAs has been 9.64%, while the return for a cash ISA has been 1.21%.
The surge in ISA contributions in the run-up to the Budget is not surprising, as some people are trying to beat any potential changes to ISAs in the Budget and any hikes to capital gains tax. Interactive Investor has seen the number of customers maxing out their ISAs soar 65%.
There are currently 30,000 people with ISAs worth between £500,000 and £750,000, and 7,000 people with ISAs worth between £750,000 and £1 million.
The Autumn Budget next week is expected to bring more clarity on the potential changes to ISAs. Stay tuned for updates.
[1] MoneySavingExpert, "Autumn Budget 2022: ISA changes explained", 25 October 2022, https://www.moneysavingexpert.com/news/2022/10/autumn-budget-2022-isa-changes-explained/
[3] The Telegraph, "How to become an ISA millionaire", 18 October 2022, https://www.telegraph.co.uk/personal-finance/investing/how-to-become-an-isa-millionaire/
- With the Autumn Budget approaching, there is ongoing discussion about potential changes to ISAs, including potentially limiting cash ISA deposits within the existing annual allowance framework, aiming to encourage more long-term stock market investing.
- Personal finance newsletters and business reports suggest that investing consistently each year into a stocks and shares ISA could potentially grow large sums for later in life, despite a lower average annual return compared to cash ISAs.
- If you're considering personal finance strategies, you might be interested to know that, according to investment giant Vanguard, there has been a 43% increase in the number of clients using up their ISA allowance, with the number of ISA millionaires significantly increasing over the past few years.
- As Chancellor Rachel Reeves prepares for the next Autumn Budget, keeping up with the latest personal-finance news, such as the potential changes to ISAs and investment strategies, can help you make informed decisions about your personal finance and investing.
