How long could it take to build a £1 million ISA?
Based on the average annual Stocks and Shares ISA contribution of £7,594, our modelling suggests that:
- It could take around 41 years to reach £1 million at a 5% annual return.
- Or around 34 years at a 7% annual return with a higher‑risk growth profile.
These figures are purely illustrative. Actual returns will vary and aren’t guaranteed.
A pound saved from tax today could be a pound compounding tomorrow
ISAs shelter investments from income tax and capital gains tax, meaning more of your money remains invested. Over many years, that tax efficiency – combined with compounding – can make a meaningful difference to long‑term outcomes.
Contribution habits that can shift the outcome
Small, consistent changes can help investors stay on track:
- Increasing contributions by 2% each year can reduce the time it takes to reach long‑term goals in our modelling.
- Using more of the £20,000 ISA allowance each tax year can shorten the journey further.
Even small increases, repeated over decades, can have a compounding effect of their own.
Financial planning foundations that support ISA success
A strong financial plan can help protect long‑term progress – especially during periods of uncertainty.
This often includes:
- Keeping an emergency cash reserve (commonly three to six months of essential costs).
- Ensuring appropriate protection for income and family.
- Understanding how ISAs and pensions work together within a wider plan.
It’s important to remember that ISA balances are subject to inheritance tax, whereas pensions can be highly tax‑efficient for inter-generational planning until April 2027, when pension funds will come into scope for IHT. For some people, employer pension contributions may also make pensions a priority. The right approach will depend on individual circumstances.
Practical habits from our investment team
- Start early and use pay rises to increase contributions.
- Avoid knee‑jerk decisions during market volatility.
- Consider making contributions earlier in the tax year when possible.
- Build a diversified portfolio aligned to your goals and time horizon.
- Invest consistently and let compounding work in your favour.
However, its important to remember that when you invest your capital is at risk and you could get back less than you invested.
Why purchasing power matters
Headline values matter less than what your money can buy in the future. Inflation erodes purchasing power, so increasing contributions over time may be necessary to keep long‑term plans on track.
How we help you invest well, live well – and stay the course
Every person’s goals are different. Our financial planners and investment managers work together to help you build a long‑term plan that reflects what matters most to you.
That includes:
- Making the most of current tax‑efficient structures such as ISAs and pensions.
- Protecting income and family.
- Investing through different market cycles with diversified, risk‑aligned portfolios.
- Planning for inter-generational wealth and potential inheritance tax.
This ongoing support can help you stay focused on your long‑term goals, even when markets feel uncertain. If you’re ready to review your financial plan, simply reach out to your usual Rathbones contact or fill out our enquiry form below.
