- AJ Bell has written to chancellor Rachel Reeves urging the government to deliver radical ISA simplification to make life easier for investors and unlock £30 billion currently sitting in Cash ISAs
- As a first step towards creating a single ‘One ISA’ product, the government should create a single ISA product incorporating Cash ISAs, Stocks and Shares ISAs, Junior ISAs and Innovative Finance ISAs
- Under the plans, providers would be free to choose which investments to allow within the single ISA product
- To further bolster savers and enable a greater flow of funds to UK capital markets, government should consider increasing the overall ISA allowance from £20,000 to £25,000
- Labour committed to ISA simplification in their plan for ‘Financing Growth’ published in January, as part of efforts to encourage ‘greater utilisation of Stocks and Shares ISAs’
- A policy paper detailing AJ Bell’s ISA simplification proposals is attached to this press release
Michael Summersgill, chief executive of AJ Bell, comments:
“Chancellor Rachel Reeves has rightly placed delivering economic growth at the heart of the new government’s policy agenda. Central to that mission, as set out in Labour’s January ‘Financing Growth’ document, is reviving the UK’s capital markets. As part of this, Labour has pledged to ‘simplify the Individual Savings Accounts (ISA) landscape to make it as easy as possible for people to feel the benefits of saving and investing their money, including through increased utilisation of Stocks and Shares ISAs’.
“AJ Bell has campaigned for radical ISA simplification for years and wholly supports Labour’s intention to pursue fundamental reform in this area. By combining the best features of ISAs into a single product, the government can make it easier for people to take the first step into long-term investing. In addition, merging Cash ISAs and Stocks and Shares ISAs – the two most popular ISA products in the UK – would make it simpler for those holding money in Cash ISAs to transition towards long-term investing.
“These reforms could be undertaken at limited cost to the taxpayer and the potential prize is substantial. 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.
“From this basis, further reforms aimed at encouraging money to flow to UK business can be considered. Given around half of ISA assets held on AJ Bell’s platform are UK-focused, simply increasing the overall ISA allowance from £20,000 to £25,000 should naturally drive more money towards UK plc. Creating a genuine incentive to invest in UK assets, such as by scrapping stamp duty on UK investments, would also help achieve this aim. Or even more radical, the inheritance tax exemption enjoyed by AIM stocks could be extended to include UK listed shares and those funds that invest in them.
“If radical ISA simplification is coupled with sensible reforms to the advice guidance boundary, the UK will have the foundations for an investing revolution, benefitting individuals and the wider economy.”
1Cash ISAs see record inflows in April | AJ Bell. Based on HMRC figures showing 3 million people have at least £20,000 held in their Cash ISA and no money invested in Stocks and Shares ISAs. If each of these people invested half of this money for the long term rather than holding it in cash, this would equate to £30 billion (3 million x £10,000).
The current ISA landscape
ISA landscape under AJ Bell’s proposals
The details
