AJ Bell boss warns over ‘absolutely bonkers’ Isa charge

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The chief executive of AJ Bell said that pre-Budget uncertainty prompted large withdrawals from pensions and labelled certain changes to the Isa regime as “absolutely bonkers”.

Michael Summersgill told the Financial Times that even though the investment site reported record gross inflows via financial advisers over the year to September 30, amounting to £7bn, the sum withdrawn had increased.

AJ Bell said this was mainly caused by “elevated” pension lump-sum withdrawals owing to the uncertainty around last month’s Budget, and the previous one, over whether the government would reduce the tax-free allowance, currently set at 25 per cent of a retirement pot.

“We have seen elevated withdrawals from pensions . . . as a result of concerns of the removal of tax-free cash,” Summersgill said. This had led to “hundreds of millions of pounds of additional outflows from our business in both years”.

He added that “uncertainty and complexity seem to be the theme of everything we’re getting from government and from Treasury, and those two things are clearly undesirable”.

Summersgill’s comments are the latest warning from a wealth manager, after St James’s Place chief executive Mark FitzPatrick told the BBC on Wednesday that Budget speculation damaged people’s pensions.

Summersgill also raised concerns over the government’s overhaul of tax-free Isa wrappers in the Budget, noting that some of the measures could deter people from investing.

The FT first reported that the government would cut the amount that could be put into cash Isas annually from £20,000 to £12,000 for under-65s from April 2027.

To stop people circumventing the reduced allowance, Summersgill said HMRC was looking to levy a charge on the small elements of cash held in stocks-and-shares Isas by people under 65.

“That is essentially a tax and that’s unprecedented. Isas have never been taxed before,” he said.

“We’re supposed to be trying to simplify the Isa landscape to get more people investing. If you view [this] through the eyes of a first-time investor, every first-time investor has to start with cash in their stocks-and-shares Isa, that’s how you get the money in.

“One of the first experiences they will have in the Isa market is HMRC charging them on . . . interest on the tiny amount of cash that they have in there. It’s absolutely bonkers.”

AJ Bell said that over the year, assets under administration through its main investment site business grew to a record £103.3bn, up by a fifth on the previous year.

Shares fell 6.6 per cent to £4.88 in morning trading in London, but are up 8.6 per cent since the start of the year.