The Chancellor of the Exchequer, Rachel Reeves, is facing fierce criticism from a leading figure in the UK's investment industry over her planned reforms to Individual Savings Accounts (ISAs).
"Doomed to Fail": A Scathing Industry Critique
Michael Summersgill, the chief executive of the retail investment platform AJ Bell, has issued a stark warning that the government's proposals are "doomed to fail" in their stated aim. In an excoriating letter to the Chancellor, seen by Sky News, Summersgill accuses the Treasury of a "failure to conduct even the most basic due diligence" on the plans.
The core of the controversy is a plan to reduce the annual cash ISA allowance from £20,000 to £12,000, set to take effect in April 2027. The government's stated goal is to encourage more long-term investment in stocks and shares. However, Summersgill argues the policy will have the opposite effect, calling it a "significant backward step" for a product prized for its simplicity.
Complexity and Unintended Consequences
The AJ Bell boss, whose firm administers over £100 billion in client assets, highlighted deep flaws in the policy's design and implementation. He criticised the "lack of proper process" and the rushed timeline, which he says makes unintended consequences far more likely.
Summersgill pointed to a survey by AJ Bell which found the vast majority of savers would simply move their money into other cash products, like NS&I bonds, rather than shift to stocks and shares ISAs. He warned this "hardens the border" between the two types of ISA, representing a missed opportunity to redirect an estimated £60 billion currently held by 3 million people who only use cash ISAs.
He also lambasted the decision to exempt those aged 65 and over as "a baffling age to choose", given it does not align with the state pension age.
Threat to the 'Tax-Free' Brand and Industry Backlash
A major concern for the investment industry is the accompanying anti-circumvention rules. These include banning transfers from stocks and shares ISAs to cash ISAs and potentially applying a tax charge to cash held temporarily within a stocks and shares ISA.
Summersgill warned this could severely damage the fundamental appeal of ISAs. "The government intends to punish retail investors for using the Stocks and Shares ISA the way it was designed to be used by levying tax," he wrote. This move, he argued, risks meaning these accounts "can no longer be marketed as 'tax-free'".
The strength of this criticism underscores widespread misgivings in the sector. Sky News revealed earlier this week that a swathe of ISA providers had met with Treasury and HMRC officials to outline their concerns. Furthermore, the reforms have already impacted a separate, industry-funded campaign to promote retail investing, with several firms, including AJ Bell, pulling out due to costs and coordination issues.
The controversy emerges against the backdrop of record ISA subscriptions. In the 2023-24 tax year, savers invested a record £103 billion into ISAs, with around £70 billion of that going into cash ISAs.
A government spokesperson said: "To encourage greater investment in stocks and shares, we're developing changes to ISA rules which will prevent circumvention of the new lower cash ISA limit. We're already working closely with industry and will publish clear guidance before the changes come into effect."
