The Daily Telegraph - Saturday - Money
Revealed: Britain’s largest Isa pots are worth more than £11m
Britain’s most successful Isa investors have built pots of more than £11m each, it has been revealed.
The 25 biggest Isa savers have amassed an average fortune of £11,660,000, meaning that the largest Isas are likely to hold even more, a freedom of information request from wealth manager RBC Brewin Dolphin revealed.
Analysts said the returns required to grow an account to this size would have to be achieved through a stocks and shares Isa, rather than a cash Isas.
Investors would have needed to achieve an annualised return of more than 18pc over the 34 years to 20202021. Maximum contributions over the time frame would be just £310,760, considering the annual allowances.
The size of the Isas means that the accounts are bigger than the largest pension pots, which hold up to £11m according to data from the Office of National Statistics.
Rob Burgeman, of RBC Brewin Dolphin, said: “Not many people will be able to build a £1m Isa pot — and fewer still will make it to £11.6m. However, even if you’re not a high earner, it’s not impossible to think you might reach a million across Isas and pensions, especially when you factor in tax relief and employer’s contributions to your pension.”
Lord Lee of Trafford was the first publicly declared Isa millionaire in 2003. He revealed last year that he had reached the milestone by making contributions of £126,200 over 16 years and achieving annualised returns of 21pc.
Lord Lee said: “I believe that Isas are the most attractive tax-free wrapper in the Western world.”
The stock picker, who has 60 years of experience, said he prefers to invest in companies which pay dividends and then reinvest.
“One of the key factors in the growth amount has been the reinvestment of
dividends and the compounding of it. I have reinvested virtually all of my dividends over the years,” he said.
Sarah Coles, of Hargreaves Lansdown, said that the Isa investors with the largest pots were likely to be stock picking, and that many ordinary savers would not achieve the same returns or be comfortable with the risk they would need to take.
She said: “It’s worth bearing in mind that achieving this level of success is notoriously difficult. What we’re not seeing in these figures are those who invested just as much, took big risks, were less lucky, and as a result have less impressive Isa values.”
Kirsty Stone, of the Private Office, said it was likely that some of the investors had benefited from the Isa inheritance rules, which were introduced from 2018.
If a saver’s spouse dies, they can increase their tax-free allowance for that year to include the amount that their partner had held in Isas.
She said: “It is called an additional permitted subscription. It basically means that, say your spouse had £200,000 in an Isa when they died, you get to have a £200,000 extra Isa allowance to fund. In reality, it means that people just transfer their spouse’s Isa to theirs.”
The number of Isa millionaires nearly tripled in the course of a year. As of April 2021, HMRC data show that 4,070 had £1m or more stowed away in the tax-free wrapper, compared with 1,480 the previous year.
Savers now get an annual tax-free allowance of £ 20,000, which from next month they will be able to split across multiple types of Isas, following rule changes last year. Jeremy Hunt, the Chancellor, also delivered a boon for those who max out their Isa allowances each year when he announced in the Budget an additional £ 5,000 allowance for a new “UK Isa”, which must be invested in British assets.