"ISA Reform or a Step Back?" Investors Furious Over Limits on Long-Term Investing and Push for Domestic Stocks

[Financial News] Investors are voicing strong criticism over the government's announced overhaul of the Individual Savings Account (ISA) system. They say the benefits of existing accounts have been reduced, while new accounts will be limited to domestic investments, raising concerns that the policy is effectively forcing a return to Korean stocks.
According to the financial investment industry on the 4th, the Ministry of Economy and Finance sharply reduced the benefits of existing ISAs in its "2026 tax reform plan," announced the previous day. Previously, the minimum contract period was three years with unlimited extensions, but the revised plan caps the total contract period at five years.
The annual contribution limit has also been changed. Under the previous system, unused portions of the annual 20 million won limit could be carried forward for up to five years, but the revised plan removes that option. For example, if someone invested 5 million won in an ISA this year, the contribution limit for next year would have been 35 million won under the old rules, but it will now be capped at 20 million won.
Instead, the government plans to launch a "productive finance ISA" with stronger tax benefits. Interest and dividend income will be fully tax-exempt, and young people aged 15 to 34 with income below a certain level will be eligible for a 10% income tax deduction on their contributions. However, the new account will not allow investment in overseas ETFs listed in Korea.
Lee Sang-heon, a researcher at iM Securities, said, "This appears to be a policy designed to push investors to close their existing ISAs and open new accounts." He added, "Because the tax benefits are greater, investors who use ISAs to invest in domestic stocks are expected to move their funds."
Still, investors are complaining about the ban on overseas ETF investments. Many people have been using ISAs for long-term investment in overseas ETFs. The share of overseas ETFs within ISAs is reportedly holding at around 20% recently.
Some investors are even saying they will give up on ISAs altogether.
A salaried worker in his 30s, identified only as Jeong, who has been investing through an ISA, said, "Efforts to improve the domestic investment environment are good, but reducing existing benefits does not seem desirable." He added, "I plan to renew my ISA every five years as long as I can, and once I exceed the threshold, I will invest directly in U.S. stocks."
Experts say using artificial tax incentives to boost the local stock market is not desirable. They argue that the key is to fundamentally improve the market's attractiveness.
Professor Moon-Sung Oh of the Department of Tax and Accounting at Hanyang Women's University said, "Investors will choose markets that generate returns, even if they have to pay taxes." He added, "The government is trying to steer the market through tax policy, but in fact it will not have much effect."
[email protected] Lim Sang-hyuk Reporter