The elite £2m ISA club – here’s how to join

A group of 270 UK individuals are part of an exclusive community that is technically open to everyone in the country, if you have the time, money and investment performance to join – the £2 million ISA club.

The figure, revealed in a Freedom of Information request to HMRC by financial planning firm Bowmore Wealth Group, showed just what is possible if you take your ISA savings ultra seriously over the long term.

By investing the full annual ISA allowance of £20,000 – equivalent to £1,666 a month – in a stocks and shares ISA and achieving an average annual return of 7%, investors could build a £2 million tax-free portfolio over three decades, according to Bowmore’s calculations.

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John Clamp, chartered financial planner at Bowmore, said: “Reaching a £2 million ISA pot is no longer an unrealistic ambition for investors and could be achieved tax-free in as little as 31 years with consistent investing.”

We look at some of the best stocks and shares ISAs in a separate article.

The benefits of long term investing

The findings highlight the growing importance of ISAs as a long-term wealth-building tool, particularly as more savers look to make the most of tax-free returns.

However, Bowmore warned many investors risk falling short of their goals by holding too much in cash ISAs for too long or by dipping into their savings prematurely.

While cash ISAs may appear to offer security, their lower returns can significantly slow wealth accumulation over time – often shrinking in real terms due to inflation. In contrast, investing in equities can dramatically accelerate long-term growth, particularly when returns are compounded.

Clamp said: “ISA millionaires are becoming increasingly common but the next milestone – the £2 million ISA – is already within reach for many investors who take a long-term view.”

“The real difference comes down to behaviour. Consistently investing the full allowance and allowing returns to compound over time can turn what seems like an ambitious target into something very achievable.”

From £1 million ISA to £2 million ISA

Separate research by investment platform AJ Bell found it takes 25 years of saving £1,433 a month – or £17,196 a year, less than the £20,000 annual allowance – to build up a £1 million ISA. But it only takes a further 10 years to make it to the £2 million mark. This is assuming you get 6% growth on your investments.

Laith Khalaf, head of investment analysis at AJ Bell, said: “It’s no walk in the park to build up a million pound ISA, but once you get there, hitting new milestones becomes increasingly easy because you have a huge tailwind from growth on the money you’ve already stashed away – known as compound growth.”

He added: “Compound growth is a formidable force, though you do have to be diligent and patient to harness its power. Clearly the higher the return you achieve on your investments, the more powerful the effect of compound growth on your wealth.”

Over the long term, then, a cash saver is likely to see a weaker compounding effect than an investor putting their money into the stock market, though the investor will of course see greater fluctuations in the value of their holdings along the way.

Effects of compound growth

“Compound growth is a wonderful thing when you break it down,” said Khalaf. “Even to reach your first million pounds in 25 years, you would only need to save less than half of this sum, or £429,900, because the remainder would be made up by growth on the savings you make (assuming 6% net fund growth).

On this basis, after 12 years of saving £1,433 a month, your annual ISA fund growth is already exceeding the £17,196 you’re putting away each year. This effect gets turbocharged the more you save, because of the growth on the pot of money you’ve already built up.

Khalaf said: “This explains why it only takes 10 years, rather than 25 years, to save your second million. In other words, it’s 2.5 times easier to save your second ISA million than your first.”

This is reflected in the amount you need to save as well. To get from £0 to £1 million in 25 years you need to stump up £429,900. But to get from £1 million to £2 million by saving £1,433 a month, you would only need to stash away £171,960 yourself.

Over a decade of saving, you would receive £859,189 in growth, because not only are your new savings growing, but so is the million pounds you’ve already built up in your ISA.

Source: AJ Bell, based on 6% net fund growth per annum. Numbers do not add to round millions as they have been calculated based on whole years of saving.

To get to your third million would only take a further six years of saving £1,433 a month. During this time you would only need to stump up £103,176 in savings, with £874,067 accruing in fund growth.

In total that means 41 years of saving £1,433 a month to get to £3 million.

“If you are in the fortunate position to be able to do that, over the course of those 41 years, you would have stashed away £705,036, with the remaining £2,303,414 coming from fund growth,” Khalaf pointed out.