There are around 2,000 Stocks and Shares ISA millionaires in the UK. The most successful has accumulated more than £6m.
That’s good going for a scheme limited to a maximum of £20,000 per year. And it was a lot less than that in the early years.
So how quickly might an investor like me starting today build up an ISA million? It’s all down to how much we save each year, and what returns we might get.
ISA decade
Over the past decade, Stocks and Shares ISAs have returned 9.6% a year on average. That’s been very variable, mind.
In the 2019-2020 Covid crash year, they lost an average of 13%. The next year, they gained 13%.
As an aside, I think that shows how quickly stock market panics can ease — and how smart, long-term investors can profit from them.
How many years?
That 9.6% might not be sustainable. But shares have been outperforming other forms of investment for more than a century now.
So here’s a table showing different sample annual returns. It also shows how many years it would take to build a million if we can stash away the full £20,000, spread out over the year:
| Annual return | Annual investment | Number of years |
| 4% | £20,000 | 28 |
| 6% | £20,000 | 24 |
| 8% | £20,000 | 21 |
| 10% | £20,000 | 19 |
Future returns
What future gains are likely? Studies by Barclays found that the UK stock market has returned around 5% per year above inflation, over the long term.
Inflation is mad right now, but it should hopefully settle to around 2% in the long run. So somewhere between those 6% and 8% figures seems realistic to me.
Those timescales really are well within reach of a lot of investors today. In fact, even those in their 50s might make it before reaching retirement age.
Buffett years
While I’m here, I thought I’d add an extra table, with just one entry. It’s a special one just for billionaire investor Warren Buffett. Here it is:
| Annual return | Annual investment | Buffett years |
| 19.8% | £20,000 | 13 |
Since taking control of Berkshire Hathaway in 1965, Buffett has posted average returns of 19.8% per year.
Anyone matching that could bag a million in just 13 years. Now yes, I know, none of us is likely to equal him. But it’s inspiring to see, don’t you think?
Easy money?
Now I don’t want anyone to think it’s a sure-fire thing. They say past performance isn’t an indicator of future performance, and that’s dead right.
In particular, I think dividends could be erratic in future years. And many ISA millionaires have relied on dividends for their success.
Still, there are plenty of UK shares on dividends of 7%, 8%, and more. And the latest research from investment firm AJ Bell suggests 2023 could be the third best year ever for cash returns from FTSE 100 stocks.
Whatever we might achieve, I reckon a Stocks and Shares ISA is the best way to go for a long-term investor like me.
