The proposed British ISA has been slammed as “complete nonsense” despite potentially adding £59billion to the UK’s savings market.
Analysis conducted by easyMoney found the recently announced savings product could bolster business investment across the country.
However, critics have claimed a British ISA could end up being “hideously complicated” for the average saver down the line.
Last month, Chancellor Jeremy Hunt announced the new ISA which would award Britons an extra £5,000 tax-free allowance as long as this money is invested in UK companies.
Figures from easyMoney reveal that if all current ISA investors choose to take advantage of this additional allowance, an additional £58.8billion in savings would be accumulated by savers.
If only a quarter of current ISA investors took out a British ISA, the savings product would increase overall ISA investment by £14.7billion.
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The proposed British ISA is coming under scrutiny
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Despite this, AJ Bell’s director of public policy Tom Selby described the product as being “intellectually incoherent”.
He cited the example of how the country’s pension system has become needlessly complicated over the years with ISAs potentially going down the same path.
Selby explained: “The danger is that if we keep on adding different ISAs to the regime, then we’re going to end up with something that is so hideously complicated.
“[Then] that success is turned into a failure. We’ve seen with the pension tax rules, you can start from a reasonably sensible, simple place and then over time successive governments layer on a bit more complexity, and a bit more complexity, and you get to a point where nobody can understand it.
“You get to a point where you need a genius or a regulated financial adviser to help you navigate that landscape.”
As it stands, British adults hold £750billion in ISAs, with £456billion invested in stocks and shares ISAs and £285billion in cash ISAs, AJ Bell reports.
In 1999, then-Chancellor Gordon Brown launched ISAs to allow people to protect their savings from being taxed.
Despite concerns, Jason Ferrando, CEO of easyMoney, highlighted that many investors could be enticed by the British ISA once it is launched.
He said: “The British ISA has been envisioned to boost UK savings and boost investment into UK enterprise.
“We eagerly anticipate news on what sort of returns the new ISA will offer, and if it’s strong, we expect there to be strong take-up from people looking to take advantage of the additional tax-free allowance.”
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Britons are being taxed on their savings due to frozen thresholds PEXELSIt is predicted by experts that the British ISA will be launched by April 2025 at the earliest.
Mr Ferrando added: “We have witnessed a staggering rise in alternative ISA investment over the past few years with Innovative Finance ISAs leading the charge.
“Investors both professional and amateur are increasingly aware that there are better returns to be gained through alternative ISAs than there are in a more traditional Cash or Stocks & Shares ISA.
“There is also an increasing urge among the public to keep traditional finance institutions such as high street banks at arm’s-length.”
