The Ledger 4 of 6
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ISAs, pensions, and what compounding does and does not do for you.
7 sourced figuresnext checked 1 March 20271 piece
Compounding is real and it is routinely oversold. Time does the work, contributions buy the deadline, and inflation quietly takes a share of the answer that almost nobody shows you. This is where we insist on the figure in today's money, because a pot that finally reads six figures in twenty years is not worth six figures.
What this is not
We model arithmetic, not markets. No return assumption here is a forecast, and none of it accounts for your own tax position.
The figures underneath
What this subject rests on
The total that can be paid into ISAs in a tax year.
£20,000
GOV.UK · 2026 to 2027 tax year · checked again by 2027-03-01
Lifetime ISA limits and the government bonus.
£4,000 a year, with a 25% bonus up to £1,000 — and it counts towards the £20,000 ISA limit
GOV.UK, Lifetime ISA · 2026 to 2027 tax year · checked again by 2027-03-01
Pay in before 50, open before 40. Withdrawing for anything other than a first home or age 60 carries a charge.
The annual Junior ISA subscription limit.
£9,000
GOV.UK, Junior Individual Savings Accounts · 2026 to 2027 tax year · checked again by 2027-03-01
The child can take control at 16 and withdraw at 18. It is their money, not yours.
The standard annual allowance for tax-relieved pension contributions.
£60,000
GOV.UK · 2026 to 2027 tax year · checked again by 2027-03-01
Tapers down where threshold income is over £200,000 and adjusted income is over £260,000.
The incomes at which the pension annual allowance starts to taper.
Threshold income over £200,000 and adjusted income over £260,000
GOV.UK, Pension annual allowance · 2026 to 2027 tax year · checked again by 2027-03-01
Both tests must be met before the allowance is reduced.
The capital gains tax-free allowance.
£3,000 (£1,500 for trusts)
GOV.UK, Capital Gains Tax allowances · 2026 to 2027 tax year · checked again by 2027-03-01
Capital gains tax rates on most assets.
18% within the basic rate band, 24% above it, on gains made from 6 April 2026
GOV.UK, Capital Gains Tax rates · Gains made from 6 April 2026 · checked again by 2027-03-01
Written so far
How long it takes to reach £100,000
What £200, £500 and £1,000 a month actually get you — and why the honest answer to this question is two numbers, not one.
5 min readAwaiting review
The Swealth letter
One letter a week, on Thursday
Plain writing about British money, and the UK Wealth Blueprint to start with.