Chancellor Rachel Reeves has scrapped plans brought forward by the previous government and which were first announced in the Spring Budget earlier this year, to introduce a UK ISA, according to the Financial Times . AJ Bell led opposition to the idea, warning a UK ISA would add complexity and be ineffective in its aim of boosting UK capital markets
Commenting on the latest news, AJ Bell CEO, Michael Summersgill, says:
“The UK ISA was a political gimmick that was doomed to fail in its objective of boosting investment in UK Plc. The new government deserves huge credit for consigning this ill-conceived idea to the policy dustbin and will hopefully now take a more sensible, long-term approach to ISA reform than their predecessors, focused on simplification for the benefit of consumers.
“Merging Cash and Stocks and Shares ISAs is the obvious starting point, a reform that would make life easier for investors and would-be investors and could provide a significant boost to UK capital markets into the bargain. Over the longer-term, the government should consider whether the best features of the current ISA regime can be combined into a single ISA product.
“The benefits of simplification for consumers and the UK economy could be substantial. In particular, merging Cash ISAs and Stocks and Shares ISAs – the two most popular ISA products in the UK – would make it easier for those holding money in Cash ISAs to transition towards long-term investing.
“HMRC data suggests there are around 3 million people in the UK with £20,000 or more invested in Cash ISAs and no money invested in Stocks and Shares ISAs. If just half of that money was invested for the long term, an additional £30 billion of investment would be unlocked. That is a conservative estimate and the actual figure may be far higher, given that HMRC’s data indicates many of those individuals hold a Cash ISA balance far in excess of £20,000.
“Given around half of ISA assets on AJ Bell’s platform are invested in UK companies or UK-focused funds, UK-based firms should disproportionately benefit as a result. From this basis, further reforms aimed at encouraging money to flow to UK business can be considered when economic circumstances allow.
“Increasing the overall ISA allowance from £20,000 to £25,000 should naturally drive more money towards UK plc, while creating a genuine incentive to invest in UK assets, such as by scrapping stamp duty on UK investments, would also help achieve this aim.”
