The Centre for Policy Studies has published a new report calling for the UK’s ISA regime to be simplified, making it easier for people to save and invest for the future.
In the report ‘Retail Therapy: Making the case for share ownership’, the Centre for Policy Studies says cash ISAs and Stocks and Shares ISAs should be amalgamated.
The think tank also made a number of other recommendations, including urging the government to create a ‘Retail Investment Strategy’ focused on encouraging more people to invest for the long-term.
The report was welcomed by AJ Bell, following a campaign by the platform calling for a radical overhaul of the ISA regime.
Tom Selby, head of retirement policy at AJ Bell, said: “AJ Bell has long argued creeping complexity in the UK’s ISA regime risks putting people off using the product, alongside their pension, to save for the future. We now have six different types of ISA, with new versions added incrementally over the years with different aims and different rules.
“Any new investor engaging with ISAs for the first time would be forgiven for seeing this complexity, throwing their hands up in disbelief, and simply giving up before they’ve even started.”
Research by AJ Bell shows 96% of UK adults have heard of ISAs and 71% say they are familiar with them, however, only half of people can identify the main types of ISA, and less than a third know the ISA allowance is £20,000.
Selby said: “This complexity creates barriers to entry and leads some to opt for what they perceive as the simpler option – cash savings accounts – or to disengage from long-term saving and investing entirely.”
According to AJ Bell, combining the existing ISA regime in a single ‘One ISA’ product would make the system much simpler, particularly for those less confident about their finances.
Selby continued: “The FCA and Treasury are rightly reviewing the advice/guidance boundary, with the aim of improving engagement and ultimately encouraging more people to invest for the long-term, in line with their goals and appetite for risk. This should hopefully result in reforms which both improve the guidance savers receive and increase the number of people who take regulated financial advice.
“With increasing financial engagement now a clear policy goal, it is absolutely critical we make sure the products we want people to engage with are as easy to understand as possible.”
Selby noted that “far too many people” are still unfamiliar with investing and the topic of investing is still not widely spoken about, despite low-cost, simple investments available. AJ Bell has urged the government to consider an awareness campaign endorsing sensible long-term investing.
He said: “Efforts to increase public participation in investing are most likely to succeed if there is consensus across government, regulators and the industry. If everyone is pulling in the same direction it could bring about a revolution in attitudes toward saving and investing.”
