What changes in ISAs could mean for you and where you should invest

Metro

17 hours ago

As the British economy struggles with minimal growth and stubborn inflation, Rachel Reeves wants Brits to change the way they save money.
The Chancellor thinks too many people are content storing their savings away in a low-interest account when they could invest them, giving UK businesses a boost and likely bagging them a better return.
Reports earlier in the year suggested Reeves was planning to slash the annual limit for tax-free savings accounts from £20,000 to just £4,000.
This would encourage people – especially young people – to shift their money from a cash ISA to a stocks and shares ISA. Or so the logic would go.
But that idea was met with a lot of backlash from consumer groups, who argued it would hit risk-averse older people and others who just want their savings to be savings without worrying about building them up.
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Yesterday, Reeves gave a speech at Mansion House in the City of London where she outlined her plans to get the British economy on a better track.
In it, she did not announce any plans to change the cash ISA limits, to the relief of campaigners like Money Saving Expert Martin Lewis who called it a 'good move'.
Brian Byrnes, head of personal finance at saving app Moneybox, said cash ISAs 'are not, and never have been, a blocker to investing', describing them instead as 'a gateway'.
He added: 'We fully support the Government's ambition to foster a stronger investment culture in the UK and while our research shows that there is an appetite to invest amongst most savers, people are held back by fear of financial loss, a lack of confidence and limited knowledge.'
However, the Chancellor did say she would 'continue to consider further changes to ISAs' – without any hints about what those changes might be.
When you go to a bank, you tend to get two main options for where to put your money – a current account and an individual savings account (ISA).
Current accounts tend to be very low-interest, as they're typically used to store money you need for day-to-day budgeting and spending.
Savings accounts are used to build a nest-egg which might come in useful for the future. They usually have a higher interest rate than a current account.
There are several different types of ISA, including cash ISAs – which offer tax-free interest, with varying levels of access – and stocks and shares ISAs – which involve investment in a range of assets. More Trending
The reason ISAs can offer higher rates of interest is because the bank is technically borrowing your money to use as reserves for loans like mortgages for other people, and paying you interest.
Among the places offering the best easy-access cash ISA rates at the moment are Trading 212, which has a 4.98% rate for 12 months.
Leeds Building Society is also offering a 4.1% rate for a cash ISA account that allows withdrawals.
Stocks and shares ISAs managed by either real experts or automated services are also by platforms including Wealthify, Moneyfarm and Nutmeg. All cost some money to access.
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