Investment platform AJ Bell has written to chancellor Rachel Reeves to renew its call for a simplified Investment Savings Account (Isa) regime, claiming that reforming the current framework could unlock £30bn currently held in Cash Isas.
The platform argues that the government should create a ‘One Isa’ product, which would see Cash, Junior, and Innovative Finance Isas merge with stocks and shares Isas to make it easier to transition to long-term investing.
Meanwhile, AJ Bell also wants to see the overall annual Isa allowance increase to £25,000 from its current £20,000 level, in order to “further bolster savers” and “enable a greater flow of funds to UK capital markets”. The platform has also called for the allowance to increase each tax year in line with inflation.
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In January, the Labour Party set out plans to revive UK capital markets as part of its wider focus on delivering economic growth. As part of its plan to achieve growth, Labour pledged to simplify the Isa landscape.
“AJ Bell has campaigned for radical Isa simplification for years and wholly supports Labour’s intention to pursue fundamental reform in this area,” AJ Bell chief executive Michael Summersgill (pictured) said.
“These reforms could be undertaken at limited cost to the taxpayer and the potential prize is substantial. HMRC data suggests there are around 3 million 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 added: “From this basis, further reforms aimed at encouraging money to flow to UK business can be considered. 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.”
See also: IA: UK equities experience worst outflows on record in May
