Premier Miton has proposed a new ISA to policymakers today that would give holders an additional £5,000 on top of their existing £20,000 allowance to invest solely into UK equities.
The Great British ISA would sit alongside the current ISAs available to retail investors, but the added tax-free allowance would help redirect investment back into British businesses.
Data from Calastone revealed yesterday that funds investing in UK equities made a net loss of £811m in August, 27th consecutive month of outflows.
Indeed, a total of £35.5bn was removed from funds in the IA UK All Companies, IA UK Equity Income and IA UK Smaller Companies sectors over the past three years to June according to data from the Investment Association.
With UK investors rejecting their home market, Premier Miton said the new GB ISA would “defend the UK’s best companies from being taken over by overseas buyers who tend to hunt in the UK for bargains”.
Premier Miton chief executive Mike O’Shea said “British savings should be going into British companies,”, adding that a GB ISA would incentive investment back into the UK.
“The GB ISA would fully unlock the potential of the City, to not only scale up smaller private companies, but to provide those same companies with an attractive listing environment to stay and grow here in the UK,” he added.
The firm may want to give UK equites a much needed boost with the GB ISA, but others were less convinced.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said there are already enough ISAs on the market that allow holders to invest in the UK, so adding another would just overcomplicate things for retail investors.
“ISAs already offer all the access to UK companies you could possibly need and provides investors with the flexibility to invest where it makes most sense for them,” she said. “The last thing we need is another ISA to complicate and disrupt a range that is working extremely well for investors.
“As for an additional allowance, it certainly makes sense for the government to revisit an overall allowance that has been frozen for so many years, but not like this.”
Likewise, Bestinvest managing director Jason Hollands said while an increased ISA allowance would be welcome – especially considering it has been frozen since 2017/18 – only those who have maxed out their existing budget would use it on UK equities.
“In reality, a separate UK equity-only allowance would likely be used by those investors fully using their existing £20,000, so I am very doubtful a new GB ISA would drive anything like the additional volume of investment in UK shares that is suggested,” he added.
“And of course, those using the new allowance might just reallocate the way they use their existing ISA allowances, by focusing those entirely on non-UK shares.”
Chancellor Jeremy Hunt has already explored ways to retain British businesses, particularly in the technology sector.
He most notably floated the idea of redirecting the £1.5trn locked up in pension schemes towards private companies struggling for financing, which often seek investment from abroad instead.
Tom Selby, head of retirement policy at AJ Bell, said the government risks getting swept away in its desire to inject pension money into the UK economy.
“While ministers wanting to corral pension money into the UK economy is understandable, there is a danger hard-working savers will simply be forgotten about in all of this,” he said.
“It is also important the benefits and potential risks of these reforms are carefully explained to savers.”
But Unicorn UK Smaller Companies manager Simon Moon highlighted that support for UK technology companies is needed. Earlier this year, he explained that most emerging companies move to foreign markets where there is better investor appetite.
“We're very good in the UK at nurturing tiny tech businesses, we're just not good at following them through to conclusion because we take this rather myopic view that once you’ve had your money you need to self-fund your growth,” he said.
“You’re likely to prefer a market where you can get repeated rounds of funding to accelerate your growth.”