The Stocks and Shares ISA is a crown jewel for UK investors. The country’s premier investing account gives lifetime tax exemption on deposits of up to £20,000 per year. I’d be hard-pressed to find a better one worldwide.
The tax advantages of ISAs help even average savers to build wealth. Even starting with a £0 account, I could aim for a £300k pot. And that’s without coming close to the deposit limit or needing higher than average returns.
So how much would I need to save to hit that figure? Well, I’d need to save something. My Stocks and Shares ISA can’t earn money while it’s still empty.
Small sums
But I wouldn’t need thousands or even hundreds to get started. In fact, £5 a day might do it. A fiver sounds small these days. I’ve paid that much for a cup of coffee. But sensible ISA investing can turn those few pounds a day into gigantic sums.
The investing is key here. Without it, the £5 a day doesn’t do much at all. After 10 years, I’ve saved about £18k. After 30 years, I’ve saved about £55k. While those amounts are nothing to sniff at, I’m not close to my £300k target.
Enter the Stocks and Shares ISA. I get to my account through an app or website. Once in, I can tap a few keys and buy some stocks.
This might seem like a big step. It was when I first did it. Putting money into a stock that could go down in value? Am I not blindly throwing my money away?
Choosing well
Well, there’s no way to avoid all risk. I’m buying stocks that can go up or down. If I choose well then I’m rewarded. If I choose badly then I can lose money.
But the risk is paired with an unbeatable return. Investing in companies that grow hasn’t just performed for a few years or a few decades, it’s been the best investment around for centuries.
I don’t even need to pick the cream of the crop to make money. On a long enough timeframe, even the average company tends to do very well.
Many people aim for 10% as an average. The 10% mark is well known as the average S&P 500 returns. But even in the UK, the FTSE 250 has offered average returns above 10% over its existence.
In fact, the bigger names on the FTSE 100 also returned around 10% until some recent underperformance.
Of course, that’s not to say this return or any other is guaranteed. Investments like this can be risky and lose money.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
What happens
But what happens if I can achieve this return in my ISA? Well, I take my £0 account and put in £5 a day, saving and investing the money consistently.
The returns aren’t consistent but I’m assuming an average of 10% a year. Well, after 30 years, the account goes from nothing at all to £311,894.
Now we’re talking. That sounds like big money from such a small saving rate. And I’ve got the tax-free, high quality investing of my Stocks and Shares ISA to thank.
