Chancellor Jeremy Hunt used the Autumn Statement to announce that people will be able to make multiple Isa subscriptions of the same type from April 2024.
AJ Bell head of retirement policy Tom Selby believes this move was “sensible” but “hardly an earth-shattering change”.
AJ Bell has long called on the government to simplify Isas.
Six types of Isa currently exist: cash Isa, stocks and shares Isa, lifetime Isa, innovative finance Isa, help to buy Isa and junior Isa.
Selby said: “It is ridiculous Brits are currently faced with a choice of six types of Isa when deciding where to invest for the future, with different rules and allowances further clouding the picture.
“Although Isas have become a recognisable and trusted savings vehicle, complexity and lack of understanding remains one of the biggest barriers to investing.
“For example, 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.
“Today Jeremy Hunt had an opportunity to tackle this complexity head-on in his second Autumn Statement. Sadly, he appears to have bottled it.”
In September 2023, AJ Bell research found 65% of financial advisers believe the Isa market has become unnecessarily complicated.
AJ Bell research also found that the majority of financial advisers are in support of Isa simplification.
Eighty-four per cent went as far as to say they back the concept of having one Isa product that covers all the existing benefits of Isas.
Quilter tax and financial planning expert Rachael Griffin believes this move is “a step in the right direction” but does not deal with “the real issue at hand, the complexity of the current Isa system”.
“The multitude of Isa options available can be daunting for the average saver, potentially deterring them from saving altogether.
“A more streamlined approach, such as consolidating cash and stocks and shares Isas into a single, more straightforward product, could significantly reduce this complexity.
“This unification would encourage a broader section of the population to engage with saving and investing, balancing the accessibility of cash savings with the growth potential of stock investments.”
The chancellor also moved the age at which you can apply for an adult cash Isa to 18 from 16.
Griffin added: “While this restricts 16- and 17-year-olds from applying for a cash Isa, it is a formality as they can still benefit from a junior Isas with generous £9,000 annual limit.
“It then makes the multiple Isa subscriptions easier to implement.”
Fidelity International head of platform product policy James Carter echoes Selby and Griffin’s opinion that Hunt’s announcement is positive but does not go far enough.
Carter added: “Most people will find themselves managing a series of evolving financial objectives over time.
“However, we know that many find it difficult to identify which products best suit their saving needs.
“This complexity destroys confidence, leaving many individuals missing out on vital opportunities to strengthen both their short and long-term financial position.”
Additionally, Hunt announced the addition of long-term asset funds (LTAFs) and open-ended property funds to the innovative finance Isa.
Quilter Cheviot property research analyst Oli Creasey backed this move as it “opens up a new route that would encourage retail investors to be able to (and therefore willing to consider) investment in property”.
“That’s good news for the relatively new LTAF category, which has not yet gained much traction as a vehicle for property investment, though it could be a key beneficiary of this,” he added.
However, Selby was less convinced regarding the addition of LTAFs to the innovative finance Isa.
“While LTAFs may work for institutional pension investors, it is hard to see the case for making them available to Isa customers.
“We are talking here about an illiquid investment potentially being promoted in a world where people choose the product specifically because of the flexibility it provides.
“While any investment should, of course, ideally be long-term, life often gets in the way of people’s best-laid plans.
“Any investor considering investing in illiquid assets such as LTAFs through their Isa needs to fully understand what they are getting into and the associated risks.”
In October 2023, three open-ended UK property fund closures and suspensions were announced by St James’s Place (SJP), M&G Investments and Canada Life.
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