Interactive Investor

Autumn Statement: ii outlines five recommendations to better support investors

Our recommendations include simplifying ISAs and enabling fractional shares.

20th October 2023 11:34

by Myron Jobson from interactive investor

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  • ii calls for the simplification of the ISA framework and the ability for foreign currencies and fractional shares to be held within the ISA wrapper
  • ii also advocates for the removal of Stamp Duty on trading UK shares. 

interactive Investor, the UK's second-largest investment platform for private investors, has outlined five recommendations for the chancellor ahead of the Autumn Statement next month to support investors.

In our Autumn Statement submission, ii calls for the simplification of the ISA framework, the ability to hold foreign currency and fractional shares in an ISAreview the Lifetime ISA and the removal of Stamp Duty on trading UK shares.

Richard Wilson, CEO of interactive investor, says: “Given the state of the nation’s finances, the Autumn Statement is unlikely to be brimming with tax cuts and other giveaways - despite the rapidly approaching general election. But the latest whispers from Whitehall suggest that changes in the ISA regime could be on the cards, as well as announcements concerning pensions and social care.

“A combination of the tax drag from the freezing of the various tax allowances in tandem with cost-of-living pressures continue to test the financial resilience of many Britons. But the right changes can provide people with confidence and vital wriggle room to save and invest for the future.

“It's crucial that we remove unnecessary complexities from ISAs. This will empower more individuals to take control of their financial future and engage with investment opportunities. Our recommendations represent a strategic move towards a more inviting investment landscape, benefiting retail investors and the broader UK economy.”

1) Simplify ISAs for enhanced accessibility

Overall, ISAs have been a success story, with 27 million adults in the UK holding savings and investments in an ISA, valued at approximately £687 billion. However, the current landscape of ISA options has led to unnecessary confusion for potential savers. This includes options ranging from straightforward equity and cash ISAs to Help to Buy, Lifetime, and Innovative Finance ISAs. To alleviate this complexity, interactive investor calls for the consolidation of existing ISA choices into equity ISAs (including Junior ISAs) and cash ISAs, providing clarity for investors and fostering more informed decision-making.

Alice Guy, Head of Pensions and Savings, interactive investor, says: “The proliferation of ISA options has inadvertently discouraged potential savers. By simplifying the choices, we can make ISAs more approachable and user-friendly for all. We want to ensure ISAs do not mirror the complexity that the UK's pension system has accumulated over time, becoming difficult for individuals to navigate. Our ISAs are at risk of heading down the same road.”

2) Allow foreign currencies to be held in ISAs

interactive investor advocates for the ability to hold foreign currency other than sterling in ISA accounts. ii believes this adjustment would not only reduce costs for international traders but also empower investors to take positions reflective of the global economic landscape.

Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “It is unfair and serves no useful purpose that customers can’t hold currency other than sterling in their ISA accounts – they can do so in their trading account and in a SIPP. This adds cost for those customers trading in international markets (who have to convert for every transaction) and also limits customers’ ability to take a position to reflect the strength of one world economy versus another.

“It's crucial to recognise that UK companies already account for 80% of direct equity exposure across our customer base. While private investors, especially older investors, are well-allocated to UK shares, some may benefit from global diversification for long-term success. Customer trends illustrate this diversity of investment approaches.

“This adjustment would be very simple to achieve, would cost the Treasury nothing in lost revenue and would make ISAs even more engaging for retail investors, while encouraging diversification overseas, which is important for building long-term financial resilience.”

3) Permit fractional shares within ISA 

interactive investor also highlights the need for fractional shares to be permitted in ISAs. This adjustment would enable retail investors to access high-value stocks without prohibitive unit costs, fostering a more inclusive approach to stock market investing and promoting growth in the British economy.

interactive investor does not currently offer fractional shares, but we have absolutely no issue with the concept.

Myron Jobson says: “For larger investors, who may be able to commit a full £20,000 ISA subscription in one go, this is less of an issue. However, for retail investors who might be saving less than £100 a month, it becomes very difficult for them to invest directly in shares while also building a properly diversified portfolio. There are around two dozen shares in the FTSE 100 with a price of over £20, while AstraZeneca (LSE:AZN) shares cost around £90 each.

“A simple technical adjustment to permit fractional shares, incurring no cost to the Treasury, would level the playing field and empower investors of all sizes to participate in the market and, in turn, contribute to the expansion of the British economy.”

4) Review Lifetime ISA

Alice Guy says: “The Lifetime ISA benefits from a top-up incentive from the government to help pay for either house purchase or retirement. It was introduced at a particular moment in policy development but has never been built on; it sits as an anomaly, a half-way house between an ISA and a pension.

“If the government wishes to offer top-up incentives, for example, for a house purchase, it would be straightforward to create a set of rules for a back-end top-up which could be paid to an ISA investor when they withdraw funds to buy their first home. This would have the additional benefit of saving the Treasury money in the short term and also give the government of the day greater control in how and when it chooses to deliver any top-up payments in the future.”

5) Removal of Stamp Duty on trading UK shares

In a separate submission to the Treasury Autumn Statement, interactive investor has proposed the removal of Stamp Duty on trading UK shares.

Richard Wilson says: “Removing the Stamp Duty barrier is a critical step towards creating a more inviting investment landscape. It's a win-win situation for both retail investors and the broader UK economy. The abolition of stamp duty would be a low burden to the Treasury, but with huge benefits to UK markets and the economy.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Please remember, investment value can go up or down and you could get back less than you invest. If you’re in any doubt about the suitability of a stocks & shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.

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