There are now more ISA millionaires than lottery millionaires, research shows, a sign of the success of the tax free savings schemes that were introduced in 1999.
Since its launch in 1994, the UK National Lottery has created more than 7,700 millionaires. Premium Bonds have created 544 millionaires since the jackpot prize was introduced in 1994, according to data obtained by money app Plum through Freedom of Information data.
HMRC says there are 5,070 confirmed UK ISA millionaires, plus an additional 2,770 investors sitting within touching distance of millionaires’ row on pots of between £900,000-£999,999.
But because the taxman’s most recent data is based on pot sizes recorded on April 5, 2023, stock market gains since then would mean that most of these pots will already have gone past the seven-figure mark by now, says Plum.
A significant number of the 4,700 investors tracked by HMRC with pots between £800,000-£899,999 will also have seen their fortunes grow to more than £1m by now, with typical ISA global trackers following benchmarks like the FTSE All World Index achieving compounded gains of 50%+ since HMRC’s data was last updated.
There were 59,970 ISA investors sitting on pots between £500,000-£999,999.
Even allowing for deaths, most could be expected to join millionaires’ row within the next 10 years, assuming they remained invested and achieved 7 per cent annualised compounded growth.
The figures released to Plum reveal that 29,510 investors had pots between £500,000-£599,999, while 15,010 had £600,000-£699,999, and 7,980 subscribers were sitting on pots of £700,000-£799,999.
There are 4,700 ISA holders between £800,000-£899,999 and 2,770 between £900,000 and £999,999.
Plum’s Rajan Lakhani said: “Few people could ever have imagined that when the ISA launched, it would one day be creating tens of thousands of millionaires and changing more lives than the National Lottery.
“But this is exactly the scenario that’s on the horizon according to HMRC’s own numbers, even allowing for the kind of stock market dips which are part and parcel of the investing cycle.”
Not everyone is so bullish on the success of ISAs.
Research from investment firm Lightyear suggests Britain remains far from becoming the “nation of investors” policymakers have called for.
More people keep emergency cash at home in a coat pocket, spare wallet or drawer (21%) - than hold a Stocks & Shares ISA (17%). A further 4 per cent admit to keeping cash under their mattress.
One in six adults say they have no savings or investments at all. The findings show that despite good intentions, the UK has failed to make investing feel straightforward for most people.
Wander Rutgers, UK CEO of Lightyear, said: “People still aren’t putting money into the stock market. Many don’t understand what long-term returns could look like. Some don’t even know what the latest ISA changes are - let alone what they mean for their own money.”
According to a report by Credit Suisse in 2022, there were then more than 62,000 millionaires in the world, of which nearly 27,000 are in the US.
Individual Savings Accounts (ISAs) were introduced in 1999, replacing their predecessor Personal Equity Plans (PEPs) which were launched in 1987 by the then chancellor Nigel Lawson with an annual allowance of £2,400.
PEP investors were allowed to lump their money into the new tax wrapper. ISA holders can put their money in either cash or stocks & shares accounts.
A new £12,000 ceiling for cash ISAs will take effect on April 6, 2027, as the government looks to spur greater investment in stocks & shares ISAs, which will keep their £20,000 ceiling.
Mr Lakhani added: “The government recently sparked controversy when it announced the cash ISA allowance would be cut from £20,000 to £12,000 from April 2027 in an attempt to incentivise greater investment in the stock market.
“It already seems the proposed reform is running into difficulty when it comes to implementation. However, while the cash ISA remains ideal for risk-free rainy-day savings, or a secure place to park funds ahead of a major near-term purchase like a house, it’s unlikely that it will ever get you to millionaires’ row, unless of course you live to be very, very old.”
Tom Selby, director of public policy at broker AJ Bell, said: “Plenty of people dream of the instant hit of a lottery win but your chances of scooping a multimillion pound prize are close to zero. Investing for the long-term through tax efficient products like ISAs and pensions, by contrast, is an option open to everyone and while most won’t become millionaires, the magic of tax-free compound growth means you can build wealth over your working life.
“The good news is you don’t have to be super rich to get in the investing habit – even relatively small contributions each month can turn into a golden nest egg over decades.”
