Just under two thirds (65%) of financial advisers believe the ISA market has become unnecessarily complicated.
AJ Bell research also found that the majority of financial advisers are in support of ISA simplification.
Eighty-four per cent went as far as to say they back the concept of having one ISA product that covers all the existing benefits of ISAs.
In April 2023, the investment platform in separate research also found that despite 96% of people having heard of ISAs, due to the six different ISA variations, only half of people could identify the main types of ISA.
The six types of ISA are Cash ISA, Stocks and Shares ISA, Lifetime ISA, Innovative Finance ISA, Help to Buy ISA and Junior ISA.
Additionally, less than a third of people knew that the annual ISA allowance is £20,000.
Due to this, AJ Bell made the call for an overhaul of the UK ISA system via a policy paper called ‘One ISA – Simplifying ISAs for consumers and encouraging saving’.
It presented this policy paper to chancellor Jeremy Hunt which outlined a system that sees all existing ISAs consolidated into a single ‘One ISA’ product.
Over three quarters (77%) of financial advisers believe the complexity behind ISAs can be attributed to “too many variants and names” for the products.
AJ Bell head of retirement policy Tom Selby said: “ISAs remain the ideal tax efficient savings vehicle to complement pensions, but there is a real danger creeping complexity will leave new investors completely bamboozled.
“This has been borne out by our consumer research, which shows half of Brits agree the different versions of ISAs make them too complicated and that a single product would make them easier to understand.
“This view is reflected in our adviser research, with around two thirds of respondents agreeing unnecessary complexity has crept into the market and more than eight in 10 supporting AJ Bell’s proposal to combine the key features of ISAs in a single product.
“Unnecessary complexity is the enemy of engagement and good consumer outcomes. In the ISA market, the mind-bending array of options risks putting people off altogether, potentially dampening the impact of wider efforts from the FCA to get more people investing for the long-term.
“As the government and regulator ramp up efforts to boost advice and guidance, it is vital the products people engage with are as easy to understand as possible. ISA simplification could be a game changer in this regard, making life easier for millions of investors and would-be investors.”
AJ Bell surveyed 349 financial advisers in August 2023 to obtain these results.
