The Investment Association trade body is calling for an overhaul of the UK ISA regime in order to create a “culture of investment to boost UK households’ financial resilience”.
One eye-catching policy suggested by the IA is to cut the cash ISA allowance in order to “reset the balance between Stocks and Shares and Cash ISAs”.
Theoretically, this policy would encourage savers to put more money into investments that will drive growth in the UK economy.
ISAs currently allow savers to deposit up to £20,000, split across Cash and Stocks and Shares.
Up to this limit, all interest, investment returns and dividends are exempt from tax.
Despite their obvious benefits, the IA noted that only one in five people hold Stocks and Shares ISAs, whilst two in five aren’t confident they would know how to open and place their money in one.
Comparatively, almost three quarters of people feel confident opening and placing their money into a Cash ISA, “suggesting many are missing out on the long-term benefits investing can bring”.
Rebranding the Stocks and Shares ISA to an ‘Investment ISA’ encompassing all suitable funds would help tp encourage adoption of the product, reckons the IA.
Chris Cummings, Chief executive of the IA, said: “This year’s Autumn Budget comes at a critical moment for the new government, and is a clear opportunity for (chancellor) Rachel Reeves to recognise the role the investment management industry can play in securing the future of our nation.
“Too many people in the UK are taking one of the biggest financial risks of all: taking no risk. This needs to change. We must create a culture of investment that allows more people to benefit from the UK’s position as an international centre for investment management, and work together to move away from ‘safetyism’ – the overemphasis on avoiding risk without considering the unintended consequences.
It is not only the UK economy that will reap the rewards, but millions of households across the UK that could benefit from the boost investment can bring to their long-term financial resilience.”