Call for more access to ISAs as 'key' for turning European savers into investors

The European Fund and Asset Management Association (EFAMA) today (27 March) called on promoting an investment culture that encourages meaningful retail participation in capital markets and supports EU investments.

The note presents a series of suggestions and principles that closely align with the European Commission’s Savings and Investments Union Strategy (SIU), published last week.

Most notably, the report emphasizes the crucial role and responsibility of Member States in advancing key objectives of the SIU.

Bernard Delbecque, senior director of economics & research, said: “Encouraging retail investment is essential not only for citizens’ long-term financial security but also for strengthening the EU economy. Our report highlights the importance of national-level initiatives, such as Investment Savings Accounts, to foster a stronger investment culture by making participation easier and more attractive. Adequate tax incentives are a key factor driving investment adoption and can also play an important role in directing more capital toward European businesses, fueling economic growth and enhancing competitiveness.”

The main messages of its paper were:

• There is no need for a new, simple, and low-cost investment product at the EU level, as the EU has already developed world-leading investment products, such as UCITS.

Member States should be encouraged to introduce Investment Savings Accounts (ISAs) where they are not yet available. These accounts should provide savers with easy access to a broad range of diversified investment options and foster a stronger investment culture. ISAs should be simple, accessible, flexible, and have adequate tax incentives. Since taxation is a national competence, the tax treatment and characteristics of ISAs should be designed and implemented at the Member State level.

• To motivate savers to invest in well-diversified products with a significant allocation to the EU economy, interested Member States should consider using tax incentives.

• A comprehensive EU-wide strategy to enhance the competitiveness of the EU economy is essential for boosting investor confidence and increasing investments in EU companies.

• Financial literacy efforts should include an investor education strategy that highlights the importance of diversification, the power of compound interest, and the benefits of long-term investing.

• Prioritizing measures that encourage and motivate citizens to save more in private and occupational pensions is essential.