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Call for radical shake-up of ISA market

11 March 2018

A group of MPs has called upon the government to radically shake up the ISA market and create a new “Everything ISA”.

The eight-strong Association of Accounting Technicians (AAT) ISA Working Group, made up of senior figures from the Conservative, Labour and Scottish National parties as well as experts from the savings industry and accounting profession, suggests folding existing ISA products into a simple wrapper, allowing individuals to monitor their savings products within a single portal.

In its report, “Time for change: a review of the ISA regime”, the AAT recommends establishing the “Everything ISA” at the same time as a baby’s birth is registered, helping future generations to save.

It also suggests adding a tick-box option stating “Add this to your ISA?” for individuals opening any savings accounts and scrapping the annual savings limits in favour of a £1m lifetime contributions allowance.

Mark Farrar, chief executive, AAT, said: “There used to be a couple of ISAs that were simple, tax efficient savings vehicles and were widely understood by the general public. We now have a system where there is an ISA for every day of the week, offering unnecessary complexity, bureaucracy and confusion.”

“ISA simplification would make their availability and features more widely understood, and ultimately play a greater part in addressing the country’s terrible savings ratio. As such, this report offers a worthwhile, credible and thought-provoking alternative to the current muddied landscape, supporting AAT member calls for greater clarity and simplicity in the financial system.”

Tom Selby, senior analyst at AJ Bell, says efforts to simplify the ISA landscape would be welcomed.

“The success of ISAs was built not only on the tax benefits available but the simplicity of the rules. However, politicians have gradually chipped away at this through the layering of unnecessary complexity, forcing savers to wade through a quagmire of allowances and rules to find the product they want.

“Complexity is the enemy of good savings policy and the Government should focus its attention on making the rules governing both pensions and ISA as straightforward as possible. The UK’s ISA regime is ripe for simplification, and while there may be different views on how this should be achieved there is no doubt the goal of making the system easier to understand and engage with is the right one.

AJ Bell supports the idea of incorporating the features of all the main ISA products – including cash, stocks and shares, junior, innovative finance, help-to-buy and lifetime – in a single product.

“On the Lifetime ISA, we agree the exit penalty and age restrictions are major drawbacks, but would prefer the Government to remove those inhibitors rather than scrapping something which has proven extremely popular with investors,” added Selby.

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