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Young adults still confused by Stocks and Shares ISA

25th February 2014 Print

The nation’s young adults are being put off investing in Stocks and Shares ISAs due to confusion over what it is the product purports to do and a wariness of the risks associated with investing in stock exchanges, according to a study carried out on behalf of AXA Wealth. However, young adults would consider investing if companies make them easier to understand and more straightforward to manage.
 
The findings, collected by polling a sample of over 2,000 UK adults, highlight the lack of education and clarity around the government-backed tax-exempt investment vehicles and implicitly illustrate the inevitable consequence that 18-34 year olds are largely ignoring the product and therefore not maximising their potential savings.
 
Nearly a third (31 per cent) of 18-34 year olds in the UK do not understand how Stocks and Shares ISAs work and therefore avoid investing in them. Furthermore, there is evidence to suggest that the appetite to invest is there from young consumers but there is a prevalent feeling that providers are failing to educate sufficiently their would-be customers.
 
Two fifths (39 per cent) of 18-34 year-old adults say that they would consider investing in Stocks and Shares ISAs if the products were better explained. This sentiment, twinned with the finding that 36 per cent of this age bracket would consider investing if Stocks and Shares ISAs carried a lower level of risk, helps to explain the present lack of take up.
 
There is a prevalent perception that ISAs carry with them hidden costs; 30 per cent of young adults admit to being put off from taking out a Stocks and Shares ISA due to a fear of the charges involved. This scepticism exists despite efforts being made by financial services providers to increase transparency and a number of products currently available on the market that are competitively priced. Similarly, nearly a third of young adults (32 per cent) state that they would consider taking out a Stocks and Shares ISA were there no difficulties or penalties attached to exiting prematurely.
 
Commenting on the survey’s results, Mike Kellard, CEO, AXA Wealth said: “The findings prove something we have long suspected – people, particularly young people, are being fundamentally put off investing in Stocks and Shares ISAs because of the investment jargon that clouds the product’s offering and makes it difficult to invest.  ISAs were designed to be widely accessible and transparent. With the UK’s ageing population and dwindling pension pots, it is vitally important that young people are made aware of the value of investing and that Stocks and Shares ISAs are one tax-efficient way of doing it.”
 
He adds: “The Government wants to get people saving and investing, but it is evident that the ISA system as it currently stands could function more efficiently. Concerns about hidden charges and the complexity of the product should be allayed by the introduction of a number of competitively priced products and the efforts that are being made by self-investor services to strip out as much jargon as possible. Cash is safer, but history tells you that it will not deliver satisfactory returns, particularly in this low interest rate environment. A blend of cash and other assets could be an option and the Government, along with business, needs to look at ways in which they can encourage people to diversify their investments.”