Leading financial services provider AJ Bell has written to new chancellor Rachel Reeves, urging the Labour government to deliver radical ISA simplification to make it easier for people to invest.
The Labour Party, which recently entered government following a general election win earlier this month, has recommended merging Cash ISAs, Stocks and Shares ISAs, Junior ISAs and Innovative Finance ISAs to create a single unified ‘One ISA’ product.
Labour figures argue that doing this will make it simpler for those holding money in Cash ISAs to transition towards long-term investing.
AJ Bell also urged the government to consider increasing the overall ISA allowance from £20,000 to £25,000 to enable a greater flow of funds to UK capital markets.
Figures from HMRC suggests that there are currently around three million British residents with £20,000 or more invested in Cash ISAs but nothing in Stocks and Shares ISAs. AJ Bell claims that if just half of that money was invested for the long term, it could unlock an additional £30bn of investment.
The actual figure may be far higher, it adds, given that HMRC’s data indicates many of those individuals hold a Cash ISA balance far in excess of £20,000.
Labour committed to ISA simplification in their plan for ‘Financing Growth’, published in January.
After winning the general election, it also vowed to “unashamedly champion” the UK’s financial-services sector. Other aims and priorities include streamlining the FCA’s 10,000-page regulatory handbook.
AJ Bell chief executive officer Michael Summersgill said: “AJ Bell has campaigned for radical ISA simplification for years and wholly supports Labour’s intention to pursue fundamental reform in this area.”
He added: “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.”
Source: Cooper, Dan. Money Marketing. July 2024. https://www.moneymarketing.co.uk/news/aj-bell-urges-new-chancellor-to-simplify-isas/