Hargreaves Lansdown chief warns against scrapping UK cash Isa

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The chief executive of Hargreaves Lansdown, the UK’s largest retail investment site, has hit out against calls for the government to scrap cash Isas, warning that it would be a “dangerous” move with “serious consequences for many UK savers”.

Dan Olley told the Financial Times that limiting or removing tax breaks on the popular cash product would not help solve the UK’s lack of investment in London-listed stocks.

His comments come after the Financial Times revealed that large City of London firms have urged chancellor Rachel Reeves to scale back tax reliefs for cash Isas in order to encourage individuals to put more money into domestic equities.

But Olley argued that rather than totally abandoning the cash individual savings accounts, the process of switching between investments and cash should be made easier. He said that people also chose not to invest because of a lack of confidence and limited understanding about investing.

“Any reform must focus on how we remove barriers to helping individuals save and invest to achieve their financial freedom, not add them,” Olley said. “Only by doing this will we boost the level of investment across the UK and in turn support the UK stock market and domestic growth.”

His comments come after a group of global fund managers, including BlackRock, Schroders, Fidelity International and Abrdn, and some of the world’s largest banks, discussed “simplifying” the Isa market in a meeting with Reeves on Wednesday.

But this would involve ditching the standalone cash Isa product, marking the biggest overhaul of the tax-free savings market since it was launched in 1999 by then prime minister Gordon Brown.

“We are committed to making it easy for people to choose to invest, but firmly believe it must be the client’s choice, not something they feel forced to do,” Olley said.

The City is hoping the move will funnel more cash into London-listed stocks, which have suffered from investors withdrawing their money in recent years in search of higher returns from global equities.

Fidelity International has called on the government to create a single Isa, cutting the tax-free cash limit to £4,000 with the remainder in stocks and shares.

There are four main Isa products in the UK, including the cash Isa, which is by far the most popular with nearly £300bn of savings. Isas allow individuals to save and invest up to £20,000 a year, free from capital gains and income tax.

However, the push to end the cash Isa has drawn criticism from consumer champions and has led to claims of vested interests, as fund managers would benefit from more money flowing into UK equity funds while banks gain fees for helping companies raise money by selling shares.

Hargreaves Lansdown, which sells Isas and other products directly to consumers, manages some £1.4bn in cash Isas out of a total £157bn held in other products through its site.

The number of cash Isas available reached an all-time high last month as consumers rushed to park cash in a tax-free shelter.