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Major investment platforms are calling for 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 slashed, while rival Hargreaves Lansdown said the market should be “as simple as possible”.
Michael Summersgill, chief executive of AJ Bell, has portrayed the reform as a key step to revive Britain’s ailing capital markets and help the new Labour government deliver on its growth agenda.
Petition: 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 simplification of the ISA” could, with further reforms, create “the foundations for an investment revolution, benefiting individuals and the wider economy”.
He reiterated calls to scrap stamp duty on UK shares, a tax that effectively penalises investors for buying British rather than foreign 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 companies, with a record £1.8bn pulled out of UK shares in May.
The capital squeeze has caused companies such as chip giant Arm Holdings to shun the London market, and prompted reforms designed to unlock billions in investment in UK startups as well as simpler listing rules.
Summersgill said ISAs, which allow savers to shield their cash or share portfolios from tax, had been a “resounding success” with £750bn held in them.
“However, this success risks being undermined by increasing 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 leave savers “feeling overwhelmed” and that addressing complexity should be the “bare minimum” for “any government that is serious about encouraging higher levels of long-term investment.”
Cash call: Latest figures from the Investment Association underline the exodus of funds from Britain’s listed companies, with a record £1.8bn withdrawn from UK shares in May
AJ Bell says Isas should be reduced to a single product. He recommends combining cash, stocks and shares, junior and innovative finance Isas, as well as raising the annual limit on Isa investments from £20,000 to £25,000.
Data has been presented showing that three million people have £20,000 or more in cash ISAs and nothing in stocks and shares.
According to a “conservative estimate”, investing just half that amount in long-term savings could unlock £30bn, AJ Bell said.
Hargreaves Lansdown chief executive Dan Olley said: “To ensure as many people as possible benefit, it’s essential we keep things as simple as possible.”
A Treasury spokesman said: “There is no time to waste in fixing the fundamentals of the economy, which is why we have taken immediate action to boost investment and economic growth.”
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