Top investment platforms are demanding a shake-up of Isas to unlock billions of pounds of investment in the UK economy.
AJ Bell is calling for the number of types of Individual Savings Account (Isa) to be radically slimmed down while rival Hargreaves Lansdown said the market needed to be ‘as simple as possible’.
Michael Summersgill, chief executive of AJ Bell, pitched the overhaul as a key step in reviving Britain’s flagging capital markets and helping the new Labour Government deliver its growth agenda.
Plea: Investment platforms AJ Bell and Hargreaves Lansdown have written to new Chancellor Rachel Reeves (pictured) demanding a major shake-up of ISAs
He said a ‘radical Isa simplification’ could, with further reforms, create ‘the foundations for an investing revolution, benefiting individuals and the wider economy’.
He reiterated calls to scrap stamp duty on UK shares – a tax effectively penalising investors for buying British rather than overseas stocks.
The proposals are set out in a letter to Chancellor Rachel Reeves and come as the latest figures from the Investment Association underline the exodus of funds from Britain’s listed firms, with a record £1.8billion pulled from UK equities in May.
The shrinking pool of capital has been blamed for companies such as chip giant Arm Holdings shunning the London market – and prompted reforms designed to unlock billions of investments in UK start-ups as well as simpler listing rules.
Summersgill said Isas, which allow savers to shelter cash or share portfolios from tax, had been a ‘roaring success’ with £750billion held in them.
‘However, this success risks being undermined by mounting complexity,’ he said.
There are five types of Isa: cash; stocks and shares; innovative finance; lifetime and junior.
The variety of products ‘with different rules, benefits and limitations can be confusing for consumers’, Summersgill said.
He added that too much choice could lead to savers ‘feeling overwhelmed’ and that addressing complexity should be the ‘bare minimum’ for ‘any government serious about encouraging greater levels of long-term investing’.
Cash call: Latest figures from the Investment Association underline the exodus of funds from Britain’s listed firms, with a record £1.8bn pulled from UK equities in May
AJ Bell says Isas should be narrowed down to a single product. It recommends combining cash, stocks and shares, junior and innovative finance Isas, as well as increasing the annual limit on Isa investments from £20,000 to £25,000.
It outlined data showing three million people have £20,000 or more in cash Isas and nothing in stocks and shares.
On a ‘conservative estimate’ investing just half that in long-term savings could unlock £30billion, AJ Bell said.
Hargreaves Lansdown chief executive Dan Olley said: ‘To ensure as many people benefit as possible it is essential we keep things as simple as possible.’
A Treasury spokesman said: ‘There’s no time to waste to fix the foundations of the economy, which is why we’ve taken immediate action to boost investment and economic growth.’
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