s it possible to become a Stocks and Shares ISA millionaire? Here are 4,560 people who’ve done it
Having a Stocks and Shares ISA worth more than £1m is not impossible, based on recent figures from HMRC. According to a freedom of information request, 4,560 individuals have reached the milestone. Having said that, the data is a few years out of date. It relates to April 2022, so I suspect the actual number is a little higher.
The amount that can be invested each year has been steadily increasing. When the product was launched on 6 April 1999, the limit was £7,000. It was increased to £15,000 in 2014 and then to £20,000 in 2017. It’s remained unchanged since.
This means that anyone who has held a Stocks and Shares ISA since inception, has been able to invest up to £330,000. Had they been fortunate enough to do this, they would have needed an annual return of 8.8% to get to seven figures.
Top of the pile
One way of trying to achieve a similar return is to buy dividend shares. And by coincidence, this is very close to the 9.1% that’s currently (20 November) on offer from Legal & General (LSE:LGEN). This makes it the FTSE 100’s highest-yielding stock.
Of course, there can never be any guarantees when it comes to payouts. If earnings were to wobble then the dividend is likely to be cut.
As a rule of thumb, a stock yielding over twice that of the 10-year gilt rate should be treated with caution. At the moment, Legal & General is right at this limit.
Strong prospects
Even so, I remain optimistic that the pensions and savings group will be in a position to steadily grow its dividend from its current level. Indeed, the management team has pledged to increase it by 2% a year from 2025 to 2027.
Although this is likely to be less than the expected rate of inflation, when combined with planned share buybacks, the group claims it’s growing the amount returned to shareholders by 5% a year.
My optimism about the group’s prospects stems from the fact that its pension arm has been winning lots of new business lately. And there could be more to come.
In October, it secured the UK’s largest pension buy-in of 2025 when it acquired two schemes from the Ford Motor Company worth £4.6bn. The group says it remains on track to reach its target of acquiring £50bn-£65bn of schemes from 2024-2028.
Pros and cons
But despite its attractive dividend, the group’s share price has been rather lacklustre lately. Since November 2020, it’s fallen 9%. Over the same period, the FTSE 100’s risen by close to 50%.
This could reflect fears that the group operates in an increasingly competitive environment. It says it’s “cognisant” of rivals that have lower capital requirements. And may be unaffected by UK regulatory rules concerning balance sheet strength.
Also, with over £1trn of assets under management, continuing global market volatility will make it harder to meet its obligations to pensioners.
However, the group’s been around since 1836. It’s survived plenty of difficult periods before, including wars and economic slumps. But as well as appreciating its longevity, I remain attracted to the stock’s dividend.
That’s why I think it’s worth considering as part of a long-term well-balanced portfolio with the aim of becoming one of the near-5,000 Stocks and Shares ISA millionaires.
