A financial expert has warned the government not to ‘wreck’ ISAs with a four-point plan that could get get more Brits saving for the future.Claer Barrett, a Financial Times columnist and expert on Lorraine and LBC said sweeping reforms to Isas were in Chancellor Rachel Reeves sights with the Treasury expected to launch a consultation on the future of tax-free savings and investment accounts.
She said: “Yippee, said absolutely no one, apart from lobbyists at UK equity funds and investment platforms who have speared this debate.”
Ms Barrett added that she believed investment managers were encouraging Ms Reeves’s plans as: “getting their hands on some of the £300bn held in cash Isas would massively benefit their businesses”.
Ms Barrett told her followers on LinkedIn how Isas allow individuals to save or invest up to £20,000 a year tax free, split between cash and stocks in any way they choose.
She said industry proposals to drop the cash element to £4,000 were part of a “mistaken belief you can force people to invest, not to mention skewing tax breaks towards UK-listed stocks”.
On FT.com Ms Barrett outlined her four-point plan to save cash ISAs and encourage more savers. She said Isa reforms need to remove barriers to investing, not create more of them.
Her first proposal was to reform Isas to include both cash and stocks and shares, rather than silo them into separate accounts. She agreed with AJ Bell’s propsal to simplfiy Isas to just one account. “Simplifying this process and supporting the creation of “hybrid” Isas designed to contain both cash and stocks would make this transition easier.”
Ms Barrett’s second proposal was in educating savers and she urged the HM Treasury should look at how Gen Z is leading the way. “Some 38 per cent of 18-25-year-olds in the UK report holding investments; the highest proportion of all age groups according to research by Platforum.” she said investment apps such as Trading 212 and Moneybox are packed with video content designed for the TikTok generation.”
She said cash Isas should carry warnings about inflation eroding spending power over time, or the investment returns savers could be missing out on.
Her third proposal involved professional finance advice. She said loosening the regulatory advice guidance boundary and enabling financial providers to give their customers “targeted support” would be a game changer for encouraging savers to invest in UK stocks although it would be a longer term plan.
Her fourth and final proposal is to get rid of stamp duty on UK shares. She said doing this for Isa investors would cost £120 million, “which is peanuts in the grand scheme of things.
She said: “Building a culture of investing is not going to happen overnight, but destroying one by miring Isas in unwise, restrictive legislation could wreck what we have already built very easily.”
Ms Barrett is on Instagram and TikTok as @ClaerB
