A couple who maximise their Isas at the new £15,000 limit could be millionaires within 20 years, allowing for investment returns, Towry has claimed.
Andy James, head of retirement planning at Towry, said Isas may not be considered the most perfect investment and savings vehicle due to difficulties many investors have faced in transferring their Isas to different providers and the low returns banks are offering on cash Isas.
But he argued the New Isa can be hugely beneficial as a long-term tax-efficient savings product, even more so now the new annual limit has increased to £15,000 as of today (1 July) and investors can either invest cash or stocks and shares, or a combination of both.
Mr James said: “A couple who maximise their full Isa allowances from this tax year (ending 5 April 2015) onwards, could become Isa millionaires in 20 years even if the Isa limit did not move from its new £15,000 level, having £1,041,578 at the end of the 2033 to 2034 tax year.
“This assumes 5 per cent annualised investment returns over the period, with no withdrawals or transfers.
“If the couple are planning to retire in around 20 years from now, that money could be withdrawn tax-free in their retirement. They could choose for example to take an initial income of £40,000 per year starting in 2034, increasing by 2 per cent each year thereafter to allow for inflation.
“...Even with Isa contributions ceasing in 20 years time and £40,000 being withdrawn annually (plus 2 per cent per year to allow for inflation), investment returns of 5 per cent per annum will mean the portfolio will still continue to rise.”
