The Labour government is expected to abandon plans to create a “Britain Savings Account”, a scheme initially proposed by the previous Conservative administration to encourage investment in British shares.
The move comes amid concerns that the initiative could complicate the individual savings account market rather than effectively support UK stocks.
Former Chancellor Jeremy Hunt announced the UK Individual Savings Account (ISA) in his March Budget as a measure to encourage investment in domestic shares, offering a tax-free allowance of up to £5,000 in UK shares on top of the existing ISA allowance of £20,000. The proposal is intended to address concerns about the valuation gap between UK and US-listed companies and the relatively low level of individual investment in shares on the London Stock Exchange.
However, the policy has faced criticism from industry players who claim it will further complicate the investment landscape. Leading investment platforms including AJ Bell and Hargreaves Lansdown have expressed concerns that the UK’s “individual savings accounts” could deter potential investors from using ISAs due to their added complexity. The Financial Times first reported on the government’s decision to scrap the policy.
Michael Summersgill, chief executive of AJ Bell, welcomed the decision, saying: “The UK’s Individual Savings Accounts were a political stunt that was doomed to fail in its aim of boosting investment in UK limited companies. The new government deserves huge credit for consigning this ill-conceived idea to the political dustbin, and we hope it will now take a more sensible and long-term approach to ISA reform than its predecessors, with a focus on simplification for the benefit of consumers.”
Summersgill points to HMRC data suggesting that three million people have £20,000 or more invested in cash ISAs but no investments in stocks or bonds. He suggests that converting half of that money into shares could generate more than £30bn of investment for UK businesses. AJ Bell is calling for cash and shares ISAs to be combined into a single, simpler scheme, encouraging millions of cash savers to consider investing in shares.
Dan Oley, chief executive of Hargreaves Lansdown, also welcomed the government’s decision, stressing the importance of simplicity in encouraging people to start investing. “We are pleased that the government will not be pursuing this because simplicity is key when it comes to encouraging people to start investing,” said Oley. “An individual savings account in the UK would have added complexity with little real benefit for many people.”
He stressed the importance of starting to invest early to benefit from compound growth, noting that many people lack the confidence or time to invest, which remains a major challenge.
Despite reports that “UK individuals’ accounts” would be cancelled, a Treasury spokesperson confirmed that no final decisions had been made: “The government will provide further information on its plans for UK individuals’ accounts in due course.”
The decision to abolish the UK’s Individual Savings Account reflects a broader move to simplify financial products and encourage long-term investment in UK businesses. Industry leaders and investment platforms hope that a Labour government will pursue ISA reforms that prioritise consumer benefits and accessibility, promoting a more direct route to investment in the UK market.