At a 5% rate of return, a 35-year-old who starts investing now, and maximises their allowance each year is predicted to have a £1 million ISA pot before their 60th birthday. While at a more conservative rate of 3% per year, the landmark figure would be reached before their 65th birthday.
One hand giveth, the other taketh away
Utilising your ISA allowance has become increasingly attractive for investors over the last decade, with the government gradually reducing the ceiling for pensions from £1.8 million to £1 million. To offset this, they have simultaneously increased the ISA allowance to £20,000 in a deliberate ploy to collect income tax receipts upfront, instead of waiting until the taxpayer draws down their pension.
If you believe you are likely to accumulate a pension greater than the current ceiling, it would be wise to start using your ISA allowance now. It is likely your pension is invested in a mix of stocks, bonds and alternative investments such as precious metals, so why not use your ISA allowance the same way?
You can choose to invest in an ISA account where you can make your own investment decisions, or you can choose a ready-made portfolio that will be managed on your behalf, and specifically tailored to your goals and risk profile.