A radical simplification of the UK’s ISA framework should be implemented as soon as possible, a Committee comprising MPs and industry experts has said.

Time for change: A review of the Individual Savings Accounts (ISA) regime published by the Association of Accounting Technicians (AAT), has suggested a new ‘Everything ISA’ should be created as part of reforms designed to make ISAs easier for consumers to understand.

This will provide a wrapper for every type of tax-free individual savings account, the Committee said.

AJ Bell senior analyst Tom Selby commented: “The success of ISAs was built not only on the tax benefits available but the simplicity of the rules. However, politicians have gradually chipped away at this through the layering of unnecessary complexity, forcing savers to wade through a quagmire of allowances and rules to find the product they want. Indeed, it is possible a ‘Care ISA’ will be added to mix as policymakers scrabble for sticking plaster solutions to the long-term care crisis.

“Complexity is the enemy of good savings policy and the Government should focus its attention on making the rules governing both pensions and ISA as straightforward as possible.

“The UK’s ISA regime is ripe for simplification, and while there may be different views on how this should be achieved there is no doubt the goal of making the system easier to understand and engage with is the right one. We believe there is a strong argument for incorporating the features of all the main ISA products – including Cash, Stocks and Shares, Junior, Innovative Finance, Help-to-Buy and Lifetime - in a single product. On the Lifetime ISA, we agree the exit penalty and age restrictions are major drawbacks, but would prefer the government to remove those inhibitors rather than scrapping something which has proven extremely popular with investors.”

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