AJ Bell’s boss has said that ISA simplification is expected to be a priority for the government next year.
“My understanding is that in 2025 we’ll see some progress on ISA simplification, and we’ll look to engage with government as part of that,” said AJ Bell CEO Michael Summersgill.
There had been anticipation of a shakeup in the regime in the run-up to October’s Budget, as Labour had promised a path to simplification in its plan for financial services in the run-up to the election.
“They put pen to paper on a commitment to deliver ISA simplification, which is encouraging to see,” the trading platform chief told City AM.
However, the only change made to the regime was Labour scrapping proposed plans for a British ISA, which former Chancellor Jeremy Hunt announced at the March Spring Budget.
The specialist investment account would have allowed savers to invest an extra £5,000 tax-free in UK equities on top of the existing £20,000 allowance.
Labour otherwise left the system unchanged, keeping the annual allowance fixed at £20,000 for the main product, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs.
“My understanding is that it was not seen as a priority issue,” said Summersgill. “You’ve seen what they saw as a priority issue in the October Budget, ISA simplification was never making the cut in a tax raising Budget like that.”
However, there is hope on the horizon for a regime shakeup, with rumours beginning to circulate that the government will begin to look at possible changes next year.
Push for changes to ISA regime
AJ Bell and other investment platforms have been pushing for simplification through a combination of Cash, Stocks and Shares, Junior and Innovative Finance ISAs in a single product.
According to data from HMRC, around 3m people in the UK have £20,000 or more invested in Cash ISAs with no money in the Stocks and Shares alternative.
AJ Bell calculated that if just half of that money was invested for the long term, an additional £30bn of investment would be unlocked.
“We need to try and get more people investing, and ISAs are a great vehicle to do that, because it’s a well-known and well-liked part of financial services infrastructure and is well-trusted by customers,” Summersgill said.
“While everyone understands what an ISA is, if you ask people to identify the main types of ISAs, only half the population can do that. We’ve got far too many ISAs on the market now, and that causes a lack of engagement.”