Changes to Isa rules are “vital” to boost financial security in the UK at a time people have stopped saving as the cost of living crisis bites.
Research has found millions in the UK could face financial difficulties later in life due to a poor understanding and low take up of long-term investing.
Platform InvsetEngine found 56 per cent of UK adults have stopped saving during the cost of living crisis.
It found almost of half of adults in Germany would prefer to invest their money rather than save it, compared to just a third of adults in the UK.
Just 14 per cent of UK adults have a stocks and shares Isa, according to the study.
It also found there is a lack of financial education in the UK, with 55 per cent saying they were uncertain whether investing money offered better long-term returns than cash savings.
Of those asked, 61 per cent did not feel their own education gave them enough understanding of how to invest.
It comes ahead of the government’s Autumn Statement, which could see changes to Isa rules.
InvestEngine has written to the Treasury ahead of the statement calling for a single, all-purpose Isa account for both cash savings and stocks and shares to be introduced and to rename Isas to ‘tax free accounts’ to make clear the main benefits of using them.
It has also asked for a boost in financial education from a younger age.
Andrew Prosser, head of investments at InvestEngine, said: “Change is badly needed, both in terms of our culture towards personal finances and in the role that industry and government can play in facilitating that change.
“When it comes to growing your wealth through investing, the best route for many will be via ‘little and often’ investing through an Isa, utilising diversified and low-cost funds like ETFs.
“As the Autumn Statement approaches, we’re encouraged to see the UK government exploring ways to simplify the Isa landscape to make it easier for people to save and invest, but there needs to be further action to simplify the system and boost financial literacy.”
tara.o'connor@ft.com
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