LONDON HAS FALLEN SHORT A ‘RISKY’ CHANGE TO AN ALREADY COMPLEX ISA SYSTEM

New analysis has shown that investors choosing British stocks over their international counterparts could lose out in the long term. Over the past 10 years, an investor who consistently invested £5,000 a year in a tracker following the FTSE All Share would have made £67,658, according to calculations by stockbroker AJ Bell. But the same investor putting money into the Fidelity Index World, which mirrors the performance of the MSCI World, would have seen their pot grow to £97,488 – a difference of £30,000. If they invested in US stocks, they would have more than doubled their pot to £113,230 by the end of the period.

The Isa system, which initially was hailed as an easy and simple way for retail investors to put money into the stock market, has become more and more complicated as a result of piecemeal reforms. Analysts said that rather than simplifying the system, as many hoped, this change will only make things more difficult to navigate.

Summersgill said: “For most people, the UK Isa only adds an unwelcome complexity. Rather than complicating Isas, the Government should be making it easier for people to invest by simplifying the Isa landscape.”

Andrew Prosser, of online investment platform InvestEngine, said: “While efforts to support British companies should be welcomed, this shouldn’t be achieved by putting responsibility on to the shoulders of everyday investors.”

He said that the narrow focus of the UK Isa could mean that small- time retail investors were left to navigate a tricky environment that they did not fully understand.

Prosser said: “The announcement of a UK Isa will only act to encourage people to concentrate investments in UK equities, something that is unsuited to most retail investors and would expose their savings to unnecessary levels of risk and potential losses.”