Cash and stocks and shares Isas should be amalgamated to encourage more people to invest their savings, a think-tank has said.
There is a ‘real opportunity’ in helping those who have cash Isas understand the opportunities that exist in stocks and shares Isas, the Centre for Policy Studies said this week (July 5).
The report’s author, Nick King, said the UK is falling ‘woefully short’ when it comes to retail investing and individuals actively choosing to invest their savings in the stock market.
“This has huge implications: for the financing of UK businesses, for the personal finances of the individuals concerned, and for public understanding and the wider reputation of the free-market system,” he said.
The proportion of UK shares held by UK residents has fallen from 50 per cent in the 1960s to 12 per cent this year, according to the Office for National Statistics.
The creeping complexity in the UK’s Isa regime risks putting people off using the productTom Selby, AJ BellFigures from the Financial Conduct Authority show there are 9.7mn people in the UK with investable assets of over £10,000 mostly or entirely in cash, with four million of these wanting to take some form of investment risk.
King said the ideological arguments are “strong”, with investing being rewarding on an individual level while giving investors the opportunity to shape the companies they invest in.
The practical benefits are also clear, King said, with an increase in investment aiding UK companies, growing the economy and rewarding those who make the investments as a result.
“Thanks to modern technology and the growth of investment apps the barriers to entry are historically low – certainly when compared to buying property,” he said.
Those with their savings in cash will be seeing the value of their savings eroded by inflation, which has sat above the Bank of England’s 2 per cent target for two years.
Andrew Griffith, economic secretary to the Treasury said wider share ownership is good for savers, good for the economy and good for society.
“Outside of the EU, we have the opportunity to knock down regulatory barriers to help individuals make their money work harder for them and to make it easier for entrepreneurs and businesses to raise investment in the UK,” he said.
“However, increasing individual share ownership is also about changing culture, attitudes to risk and supporting individual responsibility.”
Head of retirement policy at AJ Bell, Tom Selby, said the “creeping complexity” in the UK’s Isa regime risks putting people off using the product.
There are currently six different types of Isas, all with different aims and rules.
“Any new investor engaging with Isa 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,” he said.
“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.
“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.”
sally.hickey@ft.com
