We are one year on from Alternative Investment Market companies being allowed in Isas and stockbrokers report a massive take up in this. Plus, last month Isas saw increased flexibility and contributions. Pensions have also become much more flexible in terms of how you draw the money out as income. On the whole, investors are feeling much happier.
But has the government gone far enough? No, says Michael Johnson, a research fellow for the Centre for Policy Studies, who wants to see a complete revolution in the retirement savings market. He proposes the cash New Isa and stocks and shares New Isa and Junior Isa merged into a single Lifetime Isa with an annual investment limit of £30,000. He also wants the Treasury to contribute 50p for every £1 saved in a Lifetime Isa up to an annual allowance of £8,000. This Treasury incentive would be capped at £4,000 a year.
By offering ready access to contributions and a generous up-front incentive, he believes the Lifetime Isa would help engage Generation Y with retirement saving. Mr Johnson says: "The personal pension product is from a bygone age, before fragmented careers, university debts and an unaffordable housing market. The lack of access to pension savings, for the under-35s in particular - is too high a price to pay for tax relief. Instant access to savings is, for most people, the key requirement."
His Lifetime Isa is an interesting idea, but I see one big flaw. The Isa brand may be trusted but it is being widely used as a savings rather than an investment wrapper. Those investors who are putting Aim stocks in their Isas are a very small minority.
The revolution that is needed is for the public to embrace investing, rather than saving. Anyone with savings will have seen the value of their money eroded over the last 10 years but if they had invested on a regular monthly basis, they would be sitting on a tidy profit.
Investors Chronicle readers have a duty to educate their children about investing - as I'm sure many of you are doing. If you have any ideas on how to do this or want to share your experiences as an investment educator please let me know.
