AJ Bell has written to chancellor Rachel Reeves calling for radical Isa simplification by creating a single ‘One Isa’ product.
In a 19-page paper, published today (July 15), the firm set out its proposals and said the new government has a chance to transform Isas.
It made three suggestions to the government, the first of which was to simplify the regime to combine all Isas into a single product with a higher allowance of £25,000.
This would incorporate 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.
AJ Bell also wants to see a target support scheme launched to promote the value of regulated advice.
The final call was for the UK Isa, announced in March’s Budget, to be ditched and replaced with removing stamp duty on UK shares.
Labour did promise to simplify Isas in its Financing Growth paper published back in January.
The current ISA landscape
Michael Summersgill, chief executive of AJ Bell, said merging Isas would unlock investment in the UK.
He said: “These reforms could be undertaken at limited cost to the taxpayer and the potential prize is substantial.
"HMRC data suggests there are around 3mn 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 £30bn 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.”
He said increasing the overall allowance to £25,000 would also drive more money into UK investments.
ISA landscape under AJ Bell’s proposals
The paper set out AJ Bell’s findings that almost half of UK adults thought the different types of Isa made them too complicated.
Summersgill added: “If radical Isa simplification is coupled with sensible reforms to the advice guidance boundary, the UK will have the foundations for an investing revolution, benefiting individuals and the wider economy.”
tara.o'connor@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
