Chancellor Rachel Reeves has scrapped plans brought forward by the previous government to introduce a UK Isa, according to the Financial Times.
The UK Isa would have handed savers an additional £5,000 of tax-free investing allowance on top of their usual £20,000 allowance.
The proposal was previously put forward by former chancellor Jeremy Hunt in his Spring Budget.
AJ Bell were one of many firms opposed to the idea, warning it would add complexity to an already complicated landscape.
Reacting to the news, CEO Michael Summersgill said: “The UK Isa was a political gimmick that was doomed to fail in its objective of boosting investment in UK Plc.
“The new government deserves huge credit for consigning this ill-conceived idea to the policy dustbin and will hopefully now take a more sensible, long-term approach to Isa reform than their predecessors, focused on simplification for the benefit of consumers.
“Over the longer-term, the government should consider whether the best features of the current Isa regime can be combined into a single Isa product.”
Summersgill said merging Cash Isas and Stocks and Shares Isas – the two most popular Isa products in the UK – would make it easier for those holding money in Cash Isas to transition towards long-term investing.
HMRC data, he said, suggests there are around three million people in the UK with £20,000 or more invested in Cash Isas and no money in Stocks and Shares Isas.
If just half of that money was invested for the long term, AJ Bell claims an additional £30bn of investment would be unlocked.
“Given around half of Isa assets on AJ Bell’s platform are invested in UK companies or UK-focused funds, UK-based firms should disproportionately benefit as a result, said Summersgill.
“From this basis, further reforms aimed at encouraging money to flow to UK business can be considered when economic circumstances allow.
“Increasing the overall Isa allowance from £20,000 to £25,000 should naturally drive more money towards UK plc, while creating a genuine incentive to invest in UK assets, such as by scrapping stamp duty on UK investments, would also help achieve this aim.”
Shaun Moore, tax and financial planning expert at Quilter, described Labour’s reported scrapping of plans to create a UK Isa as a “sensible move”.
Moore said various additions to the Isa over the years means it has now become a confusing area of personal finance.
“If the UK Isa did see the light of day, it would have further muddied the water,” he said.
“The UK Isa was rife with issues and the proposals ran the risk of consumer confusion or poor outcomes.
“For example, limiting the ability to transfer out of a UK Isa to a different Isa may not be fully understood at the time of opening. Furthermore, the investment universe of a UK Isa would be naturally limited.
“The reality is, the UK has a cash savings problem and too much money is sat in low yielding cash Isas, doing very little to help them or the economy.
“Finding ways to get that money invested for the long-term would be far more beneficial to the UK as a whole without the need for the creation of an extra allowance.”
James Carter, head of platform product policy at Fidelity International, said: “While the proposed UK Isa would have achieved an extension of the aggregate amount consumers could save and invest through Isas, it would have proliferated the complexity of the Isa product set.
“We know that many people find it difficult to identify which products best suit their saving or investment needs and struggle to manage their savings across different ISA types.
“Complexity destroys confidence, leaving many individuals missing out on vital opportunities to strengthen both their short and long-term financial position.”