Britons fear they will miss out on their Isa goals by the time they hit retirement, research has warned.
According to analysis from investment app Freetrade and InvestingReviews.co.uk, 41 per cent of UK adults do not think they would pass the £100,000 mark by retirement.
More than half of all the investors surveyed predicted they would have built a pot of £218,000 by retirement.
The study, which was carried out among 1,000 Isa holders, also said 14 per cent of 18 to 24-year-olds expect to have a £1mn fortune by retirement — compared with 4 per cent across all age brackets.
Making regular investments into tax-efficient savings wrappers from the birth of a child ... could even make them a tax-free millionaire by their early to mid-30s.HollandsTo add some context, there are 2,000 Isa millionaires in the UK, but this may grow over time as investors build up their pots.
Dan Lane, senior analyst at Freetrade, said: “If a £1mn Isa isn’t in your [client’s] future, the basic habits of monthly investing in a diversified portfolio informed by your financial goals still matters more than the amount in there."
But Lane warned investors that “getting starry-eyed at the big prize and not focusing enough on the groundwork may lead to decisions that are overly informed by short-termism…getting there is all about doing the simple stuff well and consistently."
Simon Jones, chief executive of Investing Reviews, bolstered Lane’s claim, stating: “With an average annual return of 7 per cent, it would take an investor maxing out their £20,000-a-year allowance around 22 years to reach millionaires’ row.”
The research also found there has been a steady increase in the demand for cryptocurrencies, especially among young people, with 32 per cent of 18-24 year olds indicating that crypto was an appealing long-term choice.
However, cryptocurrencies did not pip Isas in the popularity charts, with 46 per cent of people aged 18-24 stating that investing in their Isa was the priority.
Jones added: “With all the fanfare surrounding cryptocurrencies, it’s reassuring to see there’s a new tribe of young investors who recognise the tremendous wealth-building powers of the stocks & shares Isa”.
The goals young people have, can possibly be perceived as overly ambitious, but this is where advisers can use their skills to help their young clients or to encourage their older clients to start saving for their children and grandchildren.
Jason Hollands, managing director of Bestinvest, encouraged parents and grandparents to continue save for their children or grandchildren as soon as they are born.
Hollands said: "Making regular investments into tax-efficient savings wrappers from the birth of a child could not just give them a leg up after school or university, but also it could even make them a tax-free millionaire by their early to mid-30s."
The Freetrade Isa report supported Hollands' statement, as 14 per cent of male and 9 per cent of female Isa savers, cited “family wealth” as their sole reason for saving.
Investment trust millionaires
Earlier this month (March 9), Richard Wilson, chief executive of Interactive Investor, speaking at the Association of Investment Companies’ UK conference, claimed it was a “myth that younger people will invest in sexy stocks and be risky-rational”.
He said: “The facts are that, for our 18-24-year-old customers, the three largest holdings they have in aggregate are investment trusts."
As reported by FTAdviser, advisers have outlined their preferred investment companies to include in their client’s Isa, depending on what stage of life the client is in. For example, advisers liked the Montanaro European Smaller Companies Investment Trust.
Also reported by FTAdviser, there are 30 investment trusts that would have made Isa savers millionaires, based on savers having invested their full allowance over the past 22 years.
calum.kapoor@ft.com
