A report published by the Centre for Policy Studies (CPS) today supports the idea of simplifying the UK’s ISA regime by amalgamating Cash ISAs and Stocks and Shares ISAs.
The report, ‘Retail Therapy: Making the case for share ownership’, makes a number of other recommendations, including urging the government to create a ‘Retail Investment Strategy’ focussed on encouraging more people to invest for the long term.
AJ Bell has campaigned for radical ISA simplification in order to make it easier for ordinary people to save and invest for the future.
AJ Bell head of retirement policy, Tom Selby, says:
“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.
“Combining the best of the existing ISA regime in a single ‘One ISA’ product would make life much simpler, particularly for those who are less confident about their finances.
“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.”
‘Tell Sid’ in 2023
“Mention of the ‘Tell Sid’ campaign will evoke fond memories from those who started their investing journey in the 80s. Linked to the privatisation of British Gas, the campaign encouraged the public to tell their friends and family about the opportunity to own a chunk of the company. It focussed on how easy it was to own shares in a household name, with light-hearted ads calling on everyone from ‘Hereford to Hinckley’ and ‘Skegness to Swansea’ to get involved in the landmark privatisation. The message could not have been clearer: investing is for everyone.
“Almost four decades on, far too many people are still completely unfamiliar with investing. Despite the fact that it is now easier than ever – you can invest online at low cost, with plenty of funds available to those not confident enough to pick individual shares – investing is rarely a topic of conversation in pubs and coffee shops.
“A similar government-funded campaign could have a huge impact on attitudes in 2023. At a time when so many people are confronted with ads and social media posts encouraging them to take a punt on cryptoassets, a campaign endorsing sensible long-term investing could provide some valuable balance.”
The need for consensus
“Today’s comments from Treasury MP, Andrew Griffith, indicate there is political support for boosting the number of UK retail investors. His remarks mirror sentiment expressed by the industry regulator, which aims to give people the confidence to invest when it is right for their circumstances.
“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.”
Dangers of ISA confusion
“ISAs enjoy strong brand recognition and efforts to boost engagement with investing should focus on building on their popularity. AJ Bell research shows 96% of UK adults have heard of ISAs, and 71% say they are familiar with them.
“However, the existence of six different ISA variations is causing confusion. Only half of people can identify the main types of ISA, and less than a third know the ISA allowance is £20,000. 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.”
