I earned a modest salary but built up a £2m Isa pot with these steps

There are more than 10,000 Isa millionaires in this country. But there is a more exclusive club growing in number every year – the £2million Isa ‘society’.

Among this group, which is less than 1,000-strong, is Jane Barr (not her real surname). By a mix of living a frugal life and investing through thick and thin since the mid 1980s, this remarkable 77-year-old from south London has built an Isa portfolio worth a little more than £2million – and all funded, until her retirement, from a modest salary.

I met Jane earlier this month at the annual general meeting of investment trust Templeton Emerging Markets, the biggest holding in her Isa.

I gave a talk at the AGM in London on the merits of long-term investing, but after speaking to Jane afterwards over a bite to eat and discovering that she was a double Isa millionaire, I did wonder whether she should have been the one standing up on that stage, preaching the virtues of long-term investing.

Hooked by her investment acumen, I interviewed her a few days ago – and she didn’t disappoint. Jane, who lives with one of her two grown-up sons, is one financially shrewd individual.

Her voyage of investment discovery is a fascinating one, and should inspire you to keep on investing – be it through an Isa or a self-invested personal pension.

The disciplines she has applied to her investing will hold you in good investment stead and give your every chance of joining the Isa millionaire club in the future.

Jane, the remarkable 77-year-old from south London who has built an Isa portfolio worth a little more than £2million – and all funded from a modest salary

Jane first became interested in investing during the 1980s when the Conservative government of the time, led, of course, by Margaret Thatcher, embarked upon the privatisation of some of the country’s heavyweight companies – the likes of British Telecom (BT), British Gas, British Airways, British Aerospace and Rolls-Royce.

‘I came from a middle class family where money was always тιԍнт,’ she says. ‘My dad was a self- employed antique dealer on the south coast while Mum looked after the family home, me and my two brothers.

‘Dad knew his antiques inside out, but often struggled to make ends meet. I left home knowing that the only way I would get on in life was by being frugal and looking after myself and my money.’

Jane moved to London after university to embark on a career as a media researcher, and while at work her interest in investing was piqued. ‘It was at the time of the British Telecom privatisation in late 1984 and all the office talk was about buying shares,’ she says.

She bought shares in all the privatisations and held on to them rather than bagging instant profits as many investors did.

With the advent of tax-friendly Personal Equity Plans (PEPs) in 1987 and the follow-on ISA (Individual Savings Account) 12 years later, Jane began using these vehicles to amᴀss a portfolio free from tax. Today, her Isa portfolio comprises some 40 holdings. Although some are household names such as National Grid, Shell and Unilever, most are investment trusts.

Her most valuable stakes are in Templeton Emerging Markets and 3i Group – which are both worth about £285,000. Other key holdings include CQS Natural Resources Growth & Income, F&C, TR Property and Scottish Mortgage.

Apart from her £2million Isa with Scottish Widows, Jane also has a self-invested personal pension worth £1.2million and an investment portfolio worth some £300,000, which she is steadily moving across to her Isa (subject to the maximum annual allowance of £20,000 and an eye on capital gains tax).

So what are Jane’s tips for the likes of you and me on how to join the Isa millionaires’ club? Most are pleasantly straightforward and uncomplicated.

INVEST REGULARLY

Jane’s investment philosophy is built around squirrelling money away in an Isa on a regular basis – and then letting the stock market do the rest.

‘I’m a long-term investor even at age 77,’ she says. ‘I tend to invest with at least a ten-year time horizon and don’t get unduly concerned when share prices dip.’

REINVEST DIVIDENDS

She has never taken any income from her Isa. Instead, all the dividends she receives are automatically reinvested, increasing her shareholdings in individual companies. ‘As far as I am concerned, reinvesting your dividends is a sure-fire way to build long-term wealth,’ she says.

‘With every dividend you reinvest, you increase the number of shares you own and, by implication, the opportunity to earn even more income in the future which can then be reinvested. It’s like a snowball, growing larger as it rolls downhill.’

USE INVESTMENT TRUSTS

Although Jane holds shares in many household names, her portfolio is now dominated by investment trusts.

‘I like them because they are diversified across a spread of companies,’ she says. ‘The managers also do all the worrying for you in terms of finding the investment opportunities to grow the trust’s share price.’

VALUE FOR MONEY

Jane likes to find investments where charges don’t erode returns. For example, the ongoing annual charge for F&C, which she holds, is 0.45 per cent. Respective charges for Alliance Witan and Brunner are 0.47 and 0.61 per cent.

MAXIMISE YOUR ISA OPPORTUNITY

Her Isa success has been built on utilising to the maximum her annual Isa allowance – something she has done religiously since 1999 when Isas came on stream.

‘Of course, not everyone now has £20,000 a year available to put in an Isa,’ she says. ‘But try and use as much of your allowance as you can. I’m thrifty by nature and find it difficult to spend money. I would rather forego a daily coffee at my local cafe than lose out on the opportunity to invest a bit more.’

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Although Jane has never used an Isa to save, she understands why some prefer cash Isas rather than the stocks and shares variety – for example, wannabe homeowners saving for a deposit or elderly people who cannot avoid to take risks with their retirement capital.

But for those looking to build wealth which will secure them a financially secure retirement, she believes tax-efficient investing through an Isa – or a pension – is the best way forward.

She adds: ‘Over the long term, shares tend to produce better outcomes for investors than cash for savers. So my message to Wealth & Personal Finance readers is to invest regularly and slowly – and be patient.’

KEEP ENGAGED… AND LEARN FROM OTHERS

Jane retired at the age of 51 following a divorce, and she now works one day a week at the Victoria and Albert Museum in London, cataloguing online its traditional jewellery collection.

This gives her plenty of time to engage with her investments, including attending annual general meetings that they hold.

‘A lot of what I’ve learnt about investing has been gleaned from these meetings,’ she says. ‘Not just from the investment managers but from the questions that fellow shareholders ask.

…And she’s leaving the whole lot to her sons! 

Jane has no desire to take any income from her Isa – or even to take some of the profits and enjoy the finer things in life.

The only Isa withdrawal she has ever made – a six-figure sum – was some five years ago to resolve a ‘family issue’.

It’s an altruistic approach which many people will struggle to understand. Surely, she should enjoy the fruits of her investment labours?

‘I don’t need to access my Isa,’ she insists. ‘I’ve done all the travelling I want to do and I have all the clothes I need. I love seeing my Isa grow, but I will leave it to my two sons to enjoy the financial benefit from it. Yes, there will be a substantial inheritance tax bill for them to pay, but there will be more than enough left over to keep them financially sweet.’

I trust that Jane’s Isa journey will inspire you to keep investing. You never know, encouraged by her story, you might well get to join her in the Isa millionaire club in years to come – or even the £2million Isa society.

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