Advertisement
UK markets closed
  • FTSE 100

    7,895.85
    +18.80 (+0.24%)
     
  • FTSE 250

    19,391.30
    -59.37 (-0.31%)
     
  • AIM

    745.67
    +0.38 (+0.05%)
     
  • GBP/EUR

    1.1607
    -0.0076 (-0.65%)
     
  • GBP/USD

    1.2370
    -0.0068 (-0.55%)
     
  • Bitcoin GBP

    52,393.66
    +741.38 (+1.44%)
     
  • CMC Crypto 200

    1,371.97
    +59.35 (+4.52%)
     
  • S&P 500

    4,967.23
    -43.89 (-0.88%)
     
  • DOW

    37,986.40
    +211.02 (+0.56%)
     
  • CRUDE OIL

    83.24
    +0.51 (+0.62%)
     
  • GOLD FUTURES

    2,406.70
    +8.70 (+0.36%)
     
  • NIKKEI 225

    37,068.35
    -1,011.35 (-2.66%)
     
  • HANG SENG

    16,224.14
    -161.73 (-0.99%)
     
  • DAX

    17,737.36
    -100.04 (-0.56%)
     
  • CAC 40

    8,022.41
    -0.85 (-0.01%)
     

Great British Isa could leave investors £30,000 worse off

Jeremy Hunt, left, is expected to launch a new Isa allowance at the spring Budget
Jeremy Hunt, left, is expected to launch a new Isa allowance at the spring Budget - Simon Dawson /No 10 Downing Street

Investors could be £30,000 worse off under Jeremy Hunt’s plans for a Great British Isa.

In today’s Budget, the Chancellor announced the launch of a new Isa allowance in order to boost investment in homegrown firms.

Isas – Individual Savings Accounts – allow savers to stash away up to £20,000 a year without paying tax on interest or returns.

The Great British Isa, however, will see savers benefit from an extra £5,000 allowance for UK-listed equities.

But there have been growing concerns the move would see retail investors paying the price for the London market’s lacklustre performance.

New analysis has shown that investors choosing British stocks over their international counterparts could lose out in the long term.

ADVERTISEMENT

Over the past 10 years, an investor who consistently invested £5,000 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 contributions to £113,230 by the end of the period.

Laith Khalaf, of AJ Bell, said: “The UK stock market has fallen way behind the global stock market in the last ten years and so a Great British Isa would not have produced happy investors over this period.

“The performance of the next 10 years may not look like the last, but given that technological growth and investment indexing show no signs of abating, it wouldn’t be a total surprise to find investors continuing to find better returns across the pond.”

It is hoped a Great British Isa would revive London’s stock market amid an Initial public offering (IPO) drought.

The number of companies listing in the UK has fallen by a fifth since 2019, as firms are lured away to larger, more liquid markets.

The FTSE All Share has delivered a return of just 66pc over the last decade – compared to 219pc for global equities, while the S&P 500 has returned 320pc.

Proponents of the Great British Isa argue that it could reverse the London stock market’s fortunes, raising an estimated £200bn for British businesses.

But others have said that increased retail investment is not the solution to Britain’s poor performance.

Jason Hollands, of stockbroker Bestinvest, said strict regulation, stamp duty and the allure of innovative companies in the US are other driving factors behind the market’s decline.

He continued: “A Great British Isa might be part of the mix in turning around the prospects of the UK market by dragooning more retail investment into UK equities, but wider reforms are needed, such as ditching stamp duty on share trades.”

Many investors already have a slight “home bias” in their portfolios and so the introduction of a Great British Isa could encourage them to increase their exposure even more.

An investment portfolio should be well-diversified across sectors and geographies to reduce volatility over time.

Mr Khalaf added: “Investors would probably welcome the extra tax protection provided by a Great British Isa, but they’d prefer it without strings attached telling them where to invest their portfolio.”