There are around 4,850 Isa millionaires in Britain – the name given to those that have amassed seven-figure sums in the tax-free savings accounts.
With the amount someone can pay in capped at £20,000 per year, reaching £1million is an impressive feat.
New data from a Freedom of Information request, released to Murphy Wealth by HM Revenue & Customs, reveals more about how savers are getting to the milestone.
Nearly all of these Isas, 94 per cent of them, are fully invested in stocks and shares. This is because, while investments can lose as well as gain money, big gains are more likely to be made on the stock market than through interest on cash.
Returns on cash Isas at the moment are limited to about 4.5 per cent, but investing has the potential to return more over the long term.
The six per cent remaining kept their money in a mix of cash and investments, but the figures did not detail how the two were distributed.
Some 4,560 of the Isa millionaires made their million by investing their cash in the 2021-22 tax year – the most recent year for which this data is available.
Building wealth: Some 94% of the almost 5,000 cash Isa millionaires built their seven figure pots by investing in stocks and shares
There were 3.93million stocks and shares accounts in the 2021-22 tax year, compared to 7.14million cash accounts.
In the 2023-24 tax year, the number of cash Isas has risen to 9.94million – up 2.1million on the previous 12 months.
Meanwhile, the number of stocks and shares accounts only increased by 283,000 to 4.09million.
Despite stocks and shares now having only a 27 per cent share of all Isas, they represent 59 per cent of the total market value of accounts, at £511billion compared to £360 billion for cash.
That means the average value of stocks and shares accounts was nearly four times greater than cash Isas – £124,939 compared to £33,217.
Can you become a cash Isa millionaire?
Of all the almost 5,000 Isa millionaires, just six per cent built their £1million pot using cash Isas in combination with stocks and shares Isas.
There were 290 Isa millionaires who held Isas worth £1million through a combination of holding cash Isas and stocks and shares Isas.
HMRC doesn’t provide a breakdown of how much cash these savers held compared to investments in stocks and shares.
If you had put the maximum amount of cash permitted in a cash Isa in each tax year since 1999, you would have contributed £287,780 between April 1999 and today.
| Tax year | Cash Isa allowance |
|---|---|
| 1999/2000 | £3,000 |
| 2000/01 | £3,000 |
| 2001/02 | £3,000 |
| 2002/03 | £3,000 |
| 2003/04 | £3,000 |
| 2004/05 | £3,000 |
| 2005/06 | £3,000 |
| 2006/07 | £3,000 |
| 2007/08 | £3,000 |
| 2008/09 | £3,600 |
| 2009/10 | £3.600/£5,100 |
| 2010/11 | £5,100 |
| 2011/12 | £5,340 |
| 2012/13 | £5,640 |
| 2013/14 | £5,760 |
| 2014/15 | £5,940 / £15,000 from 1 July |
| 2015/16 | £15,240 |
| 2016/17 | £20,000 |
| 2017/18 | £20,000 |
| 2018/19 | £20,000 |
| 2019/20 | £20,000 |
| 2020/21 | £20,000 |
| 2021/22 | £20,000 |
| 2022/23 | £20,000 |
| 2024/24 | £20,000 |
| 2024/25 | £20,000 |
| 2025/26 | £20,000 |
The average Isa interest rate from 2007 to 2025 is 1.75 per cent, according to rate scrutineers Moneyfacts Compare. This is as far back as its records go.
Adrian Murphy, CEO of Murphy Wealth, says: ‘Almost all Isa millionaires have built their wealth by holding stocks and shares – and no one has got to that status holding cash alone.’
Cash Isa savers who maxed out their allowance over the last 10 years would have accrued £14,833 of tax-free interest in that time, on £198,813 of Isa contributions since April 2015. Their total pot would have risen to £213,646, figures from investment management company Janus Henderson show.
This assumes an interest rate over the ten years of 1.1 per cent, as published by the Bank of England for a variable rate cash Isa – calculated monthly.
Taking the impact of inflation into account on the contributions and interest, they would have lost £23,210.
Had they invested in a basket of stocks and shares through tracking the FTSE all share index, over the same period they would have seen the total £198,813 they paid in balloon to £261,830, with dividends reinvested.
This would have led to a return of £63,016, after allowing for fees. Stripping out inflation, stocks and shares investors would be £36,824 better off than if they had saved in a cash Isa.
For this reason, Mr Murphy says: ‘There is a popular perception that the stock market is too risky and holding cash is the safe option. But the reality is quite different.
‘Historically, a balanced portfolio of stocks and shares has delivered far higher returns over most reasonable timeframes, while cash savings have often failed to beat inflation.’
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