Home Estate Planning Spring Budget 2024: British ISA ‘doomed to fail’ as new policy gets mixed reaction

Spring Budget 2024: British ISA ‘doomed to fail’ as new policy gets mixed reaction

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The British ISA unveiled at today’s Spring Budget has provoked mixed reactions from the finance industry, with some arguing that it is “doomed to fail”.

The new British ISA, which will be launched following a three-month consultation, allows savers to invest an extra £5,000 tax-free in UK equities, on top of the £20,000 ISA allowance.

While this was a key campaign issue for some in the finance industry, with Chancellor Jeremy Hunt citing calls from “over 200 representatives of the City and our high growth sectors” during the Budget, not everyone has been supportive of the move.

Michael Summersgill, chief executive at AJ Bell, slammed the new ISA as an “ill-conceived, politically motivated decision” following the Budget.

A key point against the British ISA has been that only 15 per cent of ISA investors use the maximum £20,000, leaving a small pool of investors that will actually utilise the new product.

“In the context of the £2trn+ UK stock market, any additional investment generated by these investors through the British ISA will be a rounding error,” added Summersgill.

The plans have also been criticised heavily for introducing further complexity into the ISA system, rather than focusing on the government’s already stated goal of simplifying the ISA landscape.

James Carter, head of platform product policy at Fidelity International, emphasised that one of the main barriers that deters consumers from investing is complexity.

“Therefore, plans for a ‘Great British ISA’ must focus on simplicity,” he stated.

Andrew Prosser, head of investments at online investment platform InvestEngine, also argued that boosting the UK market shouldn’t come from “putting responsibility onto the shoulders of everyday investors”.

“The announcement of a British ISA will only act to encourage people to concentrate investments in UK equities, something which is unsuited to most retail investors and would expose their savings to unnecessary levels of risk and potential losses,” he argued.

Issues have also been raised around whether the British ISA will allow investment in UK-listed investment trusts, that themselves have the ability to buy stocks from other countries.

However, other figures in the industry were more positive on the launch, with many describing it gently as a “step in the right direction”.

Premier Miton Investors was the first firm to call for the British ISA, in September last year. The firm’s chief exec Mike O’Shea said the move from Hunt was “a crucial step in starting to recapitalise British businesses, and make the UK listing regime the global capital of capital”.

Meanwhile, Garry White, chief investment commentator at Charles Stanley, described the launch as “broadly positive”, as the move could help push more equity ownership by UK residents.

“Once more money starts to flow into London equities, a re-rating is likely to occur, but the IPO regime needs to be made more attractive too – many cheaply valued companies start to exit the market after succumbing to a bid,” said White.

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