The idea to turn a Lifetime ISA account into a 7 figure fund was in the back of my mind when I first opened one back in April 2017.
Many spreadsheets were created with various functions and formulas and the end result was that I calculated an 18% return every year would mean a £1,000,000 balance by age 60.
Here's what the original plan looked like:
| End of Tax Year Date | Paid In | Bonus | Total | Total + growth |
|---|---|---|---|---|
| 05/04/2018 | £4,000 | £1,000 | £5,000 | £5,900 |
| 05/04/2019 | £4,000 | £1,000 | £10,900 | £12,862 |
| 05/04/2020 | £4,000 | £1,000 | £17,862 | £21,077 |
| 05/04/2021 | £4,000 | £1,000 | £26,077 | £30,771 |
| And so on... |
Shares were purchased and sold and the account trundled along for a couple of years.
It wasn't until around the end of 2019 that I got serious (coincidentally just around the time of my decree absolute). It was at that point that I knew I would have to have some accountability if I was going to be successful in this endeavour and so I wrote down a goal of having a new website up with 10 pages by the end of January 2020.
LISAMillionaire.com was born and the 10 pages were published by the end of January as promised.
Had I been able to grow the account by 18% per year since it first opened, it would be at around £21k at the end of the 2019/2020 tax year. This hasn't happened so I'm going to cheat a little bit and change the maths.
The alternative plan, which is the one that is going to be used from now on, is that the LISA Millionaire fund "started" on the 6th April 2019 with a balance of £15,000. That's £12,000 paid in by me and £3,000 added by the UK government.
When I plug the £15,000 into the magic spreadsheet, this is what I get:
| End of Tax Year Date | Paid In | Bonus | Total | Total + growth |
|---|---|---|---|---|
| 05/04/2020 | £4,000 | £1,000 | £15,000 | £17,700 |
| 05/04/2021 | £4,000 | £1,000 | £22,700 | £26,786 |
| 05/04/2022 | £4,000 | £1,000 | £31,786 | £37,507 |
| 05/04/2023 | £4,000 | £1,000 | £42,507 | £50,159 |
| 05/04/2024 | £4,000 | £1,000 | £55,158 | £65,087 |
| 05/04/2025 | £4,000 | £1,000 | £70,087 | £82,703 |
| 05/04/2026 | £4,000 | £1,000 | £87,703 | £103,489 |
| 05/04/2027 | £4,000 | £1,000 | £108,489 | £128,018 |
| 05/04/2028 | £4,000 | £1,000 | £133,017 | £156,961 |
| 05/04/2029 | £4,000 | £1,000 | £161,961 | £191,114 |
| 05/04/2030 | £4,000 | £0 | £195,114 | £230,235 |
| 05/04/2031 | £4,000 | £0 | £234,235 | £276,397 |
| 05/04/2032 | £4,000 | £0 | £280,397 | £330,868 |
| 05/04/2033 | £4,000 | £0 | £334,868 | £395,145 |
| 05/04/2034 | £4,000 | £0 | £399,145 | £470,991 |
| 05/04/2035 | £4,000 | £0 | £474,991 | £560,489 |
| 05/04/2036 | £4,000 | £0 | £564,489 | £666,097 |
| 05/04/2037 | £4,000 | £0 | £670,097 | £790,714 |
| 05/04/2038 | £4,000 | £0 | £794,714 | £937,763 |
| 05/04/2039 | £4,000 | £0 | £941,763 | £1,111,280 |
| And so on... |
18% a year means a wonderful £1.1 million LISA account balance at aged 60.
And should that happen then you can bet I will be taking some of the money out and flying first class to somewhere hot and luxurious!
The concept of the LISA was very attractive because it forces me to act and forbids me from removing any capital for 20 years. The penalty of withdrawal is far too much to deal with so my only option is to keep all of the money in the LISA, investing it to try and grow it whilst also receiving "interest" in the form of dividends. These can't be removed either so they add to the overall return and are immediately available funds to invest further.
In other words, it's a self-contained investment account where dividends are reinvested.
And best of all, the whole thing is tax free.
So I urge anyone reading this who hasn't taken the LISA seriously yet - create a spreadsheet and play around with the numbers.
How much can you pay in each year?
How much bonus will that give you?
What percentage return will you need to get to seven figures by 60?
What percentage return will get you to a million earlier?
The Lifetime ISA is a superb opportunity for anyone with a bit of drive and discipline to make a lot of money and I intend on taking full advantage.