‘Now is the time!’ Britons urged to invest to become ISA millionaires

Barclays expert on possible long term growth from investing

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Despite Chancellor Rishi Sunak’s recent decision to freeze annual allowances for another year again, the number of ISA millionaires are predicted to spike in the upcoming years, research shows. The current ISA allowance is £20,000 per person, for each tax year. It would take those investing in a stocks and shares ISA 20 to 25 years, assuming average annual growth of five percent, to become a millionaire, it’s suggested.

This is also assuming they pay in the maximum amount of £20,000 each year.

The Word on the Street Money plan podcast by Barclays discussed the benefits of people investing into ISAs to build their wealth.

Clare Francis, savings and investment manager at Barclays, urged people not to be put off if they can’t put the maximum in their ISAs each year as there are still strong reasons to keep investing.

People should be doing “all they can” to get their money working hard for them, she suggested.

Robert Smith, head of behavioural finance at Barclays emphasised where the drive to become an ISA millionaire should come from.

People become millionaires with ISAs because they understand “the long run return” through the stock market – and these people are able to withstand the risks of short-term dips in the market. Additionally, they understand the value of compounding.

He explained that people tend to underestimate the effects of compounding, which stops them from investing.

He said: “With cash rates so low, the effects of compounding there are negligible and that’s why investing can be much more attractive over the longer time.”

Around 13 million Adult ISA accounts were subscribed to in 2019 to 2020, however 75 percent of these are held in cash ISAs, statistics from the gov.uk website show.

To become an ISA millionaire, it’ important for people to understand the benefits of investing, he explained.

Mr Smith argued that not a lot of people are investing into stocks and shares ISAs due to a “misunderstanding of how investments can play a part of anyone’s financial plan”.

He said: “This misunderstanding is driven by a lack of awareness.

“Investing is often seen a speculative activity, but people don’t understand the effect of managing risks through diversification and spreading these invests out.

“These perceived risks can mean that people think investments are only appropriate once someone has acquired enough wealth.

“But the reality is if you do that, you’ll spend a lot of time trying to saving into cash and not taking advantage on long term returns.

“When thinking about the best time to invest – people should get in now when they can, rather than thinking about the best time to start.”

The earlier people can start, the more time people have for their money to grow, he suggested.

For those people who may feel investing is daunting, people should create plans to get started and seek professional help.

Britons should know that when investing, capital is at risk.

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