AJ Bell, one of the UK’s largest investment platforms, today calls for a radical overhaul of the UK ISA system via a new policy paper entitled ‘One ISA – Simplifying ISAs for consumers and encouraging saving’ (attached).
In proposals presented to the Chancellor, the business has outlined a system which sees all existing ISAs consolidated into a single ‘One ISA’ product, helping make it easier for people to save and invest while giving policymakers the flexibility to incentivise a wider range of savings goals.
There is a growing savings gap in the UK, as the emphasis for long-term saving shifts from employers and the state to individuals. FCA research shows in May 2022 12.9 million UK adults – one in four (24%) – had low financial resilience, a startling increase of 2.2 million since February 2020[1]. These are people who are in financial difficulty or who could quickly find themselves in difficulty if they suffer a financial shock.
FCA data also shows there are nearly 8.6 million consumers holding more than £10,000 of investible assets in cash and has set itself a target of reducing this number by 20%[2].
New research by AJ Bell shows almost 25 years on from their launch, ISAs have become a recognisable and trusted savings vehicle, with 96% of UK adults saying they have heard of ISAs, and 71% saying they are familiar with them.
Despite strong recognition of ISAs, lack of understanding remains one of the biggest barriers to investing. Only half the people in our research could correctly identify the main types of investment ISA and less than a third know the annual ISA allowance is £20,000. It illustrates the danger that successive government interventions over two decades, leading to the creation of six different ISA variations with their own individual rules, could become a barrier that discourages saving and investing.
