Commenting on the Chancellor’s changes to the ISA regime, the team at Hargreaves Lansdown have been looking at different elements of this and investment prospects more generally, and how today’s announcements might benefit investors.
Ruchir Rodrigues, Chief Client and Commercial Officer at HL said:
“Retail savers and investors were front and centre of today’s Autumn Statement. The roadmap for ISAs sets out a clear framework for updating and simplifying this much-loved savings and investment product. The announcement on creating a lifetime pension is a significant breakthrough, a look to the future which will simplify and improve how people save for retirement. At Hargreaves Lansdown we’re focused on transforming the help and support for our clients to improve their financial lives. The forthcoming review of the advice boundary is an opportunity to create a giant leap forward in user experience, using personalisation and greater relevancy to improve engagement and drive better outcomes.”
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“Savers and investors will be delighted the Chancellor has taken the opportunity to pay some much-needed attention to ISAs to help ensure this much-loved part of the furniture remains a firm fixture for the future.
Allowing multiple ISAs of the same kind in a single tax year from April, and partial transfers of ISAs opened in the current year are both sensible ways to inject much-needed flexibility and simplicity into the system. For cash ISA savers, it offers the opportunity to jump on more competitive deals, if they become available later in the tax year.
For those using stocks and shares ISAs, it protects investors who accidentally open more than one ISA of the same type in a tax year. If you make a single regular payment into a stocks and shares ISA at the start of the tax year, and then try to invest in another stocks and shares ISA on the last day of the tax year, you’ll break the rules. The second ISA provider may end up refunding your money and you could miss a big chunk of your allowance for that year. This change would remove that risk.
There are also a number of smaller technical changes which will ease some of the frustrations of the system, including the fact that from April people will no longer need to reapply for an existing ISA.
The digitalisation of the reporting system should allow for real time reporting. It will help HMRC to track subscriptions more easily and open the door to allowing people to hold multiple ISAs of the same kind. It will also make it essential for people to keep their details up to date with HMRC to avoid any delays to applications. This process is already due for roll out to SIPPs and other personal pensions in April 2025.
The Treasury will open the Innovative Finance ISA to open ended property funds. We don’t think these are the way to invest in property because of liquidity concerns. We think closed ended funds are a better way to get pooled exposure, and these are already available through an ISA.
It’s disappointing that Jeremy Hunt didn’t take the opportunity to increase the overall ISA allowance. This was last changed way back in 2017, so would need to rise to more than £25,000 just to keep pace with inflation. This was a real opportunity to take the sting out of serious cuts to the dividend tax and capital gains tax allowances and protect savers from the horrors of income tax bills. It means many more savers and investors facing tax bills in the year to come.
The Lifetime ISA has been on and off the table for the Autumn Statement more times than a wine bottle at a book group. So, it’s disappointing that when we got to the Statement itself, Jeremy Hunt didn’t take the opportunity to make small tweaks to the LISA. It has already helped over 171,000 people onto the property ladder, and helped start saving and investing habits that will boost resilience for a lifetime, but it has the potential to do even more for homebuyers and retirees.”
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
“LTAFs offer sophisticated investment opportunities in areas like private equity, infrastructure and real estate. These have previously been hard to reach for modern workplace pensions and retail investors. Until now they couldn’t be held within an ISA because ISA assets need to have the ability to be sold within 30 days. The expansion of them within innovative finance ISAs opens this opportunity although most money is held in stocks & shares ISAs and the Chancellor missed the opportunity to open this up further to holdings in these ISAs.
The government has a double whammy aim – to not only open alternative revenue returns for investors but also to increase the flow of funding into new projects with an aim to revitalise the economy for the longer term. They could be appropriate for a small proportion of portfolios where the investment horizon is aligned to that of long-term asset fund, both to increase diversification in a portfolio, and to potentially increase growth from investments that are traditionally hard to access. However, these assets are potentially riskier, and the risks must be well flagged.
We would expect groups of retail investors also to be interested in investing in more long-term projects – particularly if they help to power the green Industrial Revolution. The key to this is to consider the retail investor’s requirements and perspectives, ensure value, well governed products which deliver good outcomes.‘’
