Dan Marsh: My half-Christmas wish list for our next chancellor
My friends and I used to celebrate ‘half-Christmas’ every June. Anyone looking in may have thought we were pretty strange eating turkey in summer with seasonal hats and jumpers on, but I always loved it.
Like other annual milestones it was a chance to pause, reflect on the year so far, and think about what was to come.
I wonder how our new chancellor might reflect on their own department’s half-Christmas moment, particularly in light of recent Isa changes. If I were writing my own wish list for them, it would look a bit like this:
1. Make the rules simpler, then leave them alone
People are accustomed to finding pension rules complicated. The legislation changes every year, and many specifically seek out an adviser as they reach retirement just to keep up.
Isas have until now been much simpler, and seen as one of the more straightforward products in British personal finance. But they have just been made significantly more complicated.
Complexity causes people to disengage, which may have longer-term consequences
Most people using an Isa will be navigating them alone. I wonder whether the new complexity will push people with a few thousand pounds in an Isa towards feeling they need an adviser to help them make sense of it.
That might be tricky, given that only 9% of the country currently has access to money advice and those with under £200,000 are often locked out entirely.
Others may just decide to avoid them altogether. Complexity causes people to disengage, which may have longer-term consequences. The person who finds the system too difficult to engage with at 35 is the person who arrives at retirement without adequate savings at 70.
It will involve everything from simplifying our products and eliminating complex jargon whenever we see it
Very often the best investment strategies tend to be simple ones, held for a long time. I’d urge the next chancellor to apply the same principle to these policies.
2. Offer more carrot, less stick
This goal is not just one for the Government but for the industry as a whole, as we know that Britain is lagging far behind Europe and the US when it comes to our investing culture.
We must join together to take all the steps we can to change this, and it will involve everything from simplifying our products and eliminating complex jargon whenever we see it, to reaching people where they are rather than expecting them to come to us.
Octopus Money appoints Dan Marsh as new CEO
There has been real progress on the government side. Initiatives like Savvy the Squirrel and targeted support are focused on the right things: growing awareness, shifting behaviour and making investing feel like something ordinary people do.
But the latest Isa reforms cut against that spirit. Rather than making investing feel accessible and rewarding, they make cash saving feel like something to be penalised. A 22% tax charge on cash held in an investment account, transfer restrictions, and age-related allowances are hard to follow for first-time investors.
I’ve seen suggestions that raising the stocks and shares allowance to £30,000 may have been a more attractive proposition for potential investors. I’m inclined to agree that could have been a better starting point.
The goal should be making UK markets as attractive as possible, not making it feel punishing to invest elsewhere
The same thinking applies to encouraging investment in UK companies. The goal should be making UK markets as attractive as possible, not making it feel punishing to invest elsewhere.
3. Make sure the medicine is proportionate to the illness
The 22% charge on cash held in Stocks and Shares Isas is designed to prevent savers from gaming the new £12,000 Cash Isa limit by parking money in an investment account to earn tax-free interest. I understand the concern, but I am not sure the evidence supports the scale of the response.
Almost all Stocks and Shares Isas hold a small amount of cash for entirely practical reasons such as covering charges, sitting between trades or providing a buffer during periods of market volatility.
The idea that large numbers of people are gaming Stocks and Shares Isas as high-yield cash accounts feels implausible
Our own portfolios hold around 0.5% in cash. On a £50,000 Isa, that is £250. At a 3% interest rate, that earns £7.50 over the course of a year. The tax charge on that comes to £1.65.
So, for most of our customers, the direct financial impact would be small. But it does raise the practical question of whether it could cost more to administer than it raises.
And the wider issue is whether it is worth introducing a permanent tax charge into a simple product to address a problem that, for the vast majority of investors, does not exist. The idea that large numbers of people are gaming Stocks and Shares Isas as high-yield cash accounts feels implausible.
For someone already nervous about investing, a wrapper that now comes with tax calculations and transfer restrictions gives them one more reason to do nothing.
I am not writing this as a critic of the government’s ambition. Getting Britain investing is good for the economy, good for retirement outcomes, and good for the long-term welfare bill. But a new chancellor is a good moment to ask whether the recent Isa changes are the best route to get there.
Dan Marsh is CEO of Octopus Money
