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According to people familiar with the plan, Rachel Reeves is preparing to start reviewing the ISA market within weeks, encouraging savers to guide more money from UK stocks.
The Treasury will begin talks to gain views across the city of London on how the UK’s ISA administration will reform, industry figures said as it is trying to strengthen what the prime minister calls the “UK culture of retail investment.”
The move has been one of the biggest shakeups in the ISA market since its inception in 1999, and could pave the way after capping the amounts held in tax exemptions from some metropolitan companies.
The UK has four major ISA products, including the Cash ISA, the most popular product at the moment, and currently houses £300 million in savings. The ISA allows individuals to invest in savings of up to £20,000 a year without income or capital gains tax.
In July, when the government aims to issue financial services growth and competitive strategies, the financial paper is set to be released within weeks and in a speech from Reeves Mansion House to city executives in July.
“Apartment houses are about making more money in the UK,” one of the well-versed people with plans added that reforms flowing from consultations could possibly appear in Reeves’ fall budget.
The Treasury said “no decision has been made,” but the government is “considering ISA reform options that balance cash and stocks.”
Reeves said this month that he wants to “create a more culture of retail investment in the UK” to help savers achieve better returns and “help support their ambitions to grow the economy.”
The Financial Times reported in January that city businesses were urging Reeves to reduce their cash ISA tax cuts. According to investment site Hargreaves Lansdown, Savers poured £4.2 billion into cash ISAs in March, up almost a third compared to the previous year.
Companies including the insurance group Phoenix and the London Stock Exchange Group told the Prime Minister in January that cash ISA money could generate better returns for the savers if invested in stocks and stocks, while supporting London’s shrinking stock market.
Fidelity International is one of the companies requesting a single ISA product, which suggested that individuals could move between cash and stocks and limit the cash portion to £4,000.
Despite speculation, Reeves did not set a change in the spring statement in March, but said the government at the time was “considering reform options,” and “acquire a balance between cash and stocks to get better returns for savers, boost a culture of retail investment and support a growth mission.”
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One industry figure said talks should lead to “more specifics in the budget” in the fall. “We know that the Treasury wants to listen, so the paper may help formalize those conversations and lighten the burden of meetings they are asked to do,” they added.
Tom Selby, director of public policy at investment site AJ Bell, said the government was “absolutely right to consider whether the current ISA system is sufficient to nurture a healthy investment culture in the UK.”
However, Carol Knight, CEO of the nonprofit Investing and Saving Alliance, said, “() reducing the tax benefits of cash ISAs does not encourage people to invest more,” urging the minister to provide better support to Britons on how best to utilize their savings.
