Are there too many ISAs?

When the ISA was launched back in the late 1990s, it was kept quite simple. After the Insurance ISA was dropped, all one had to choose from were cash or stocks and shares ISAs.

The concept was simple: invest your money in the stock markets or put it in a bank account, and any interest or growth in the capital and dividends would be tax free.

It was curtailed by how much one could put into it each, but fundamentally the product stayed simple and attracted huge inflows.

Now, as of 2019, there are five types of ISA: cash, stocks and shares, Lifetime, Innovative Finance and Help to Buy – although the latter will be closing to new accounts later this year.

While cash, and stocks and shares remain the same as ever – with the overall saving limit being £20,000 – Lifetime and Innovative Finance ISAs take a bit more understanding.

But is there too much choice?

Jamie Smith, a financial adviser at Foster Denovo, agrees: “Currently each ISA is supposed to serve a different purpose, but there is scope for some simplification. The consolidation of the Help to Buy ISA in to the Lifetime ISA from November 2019 is an example of a step towards this.

Even the tax benefits for each ISA type can differ. For example, the Lifetime ISA offers a bonus of up to £1,000 per annum but the standard stocks and shares ISA does not.”

Read the full article on FT Adviser here.