Rachel Reeves: No cuts to £20,000 ISA allowance planned
Cash ISAs are one of the most popular products for many banks, held by 18 million people, who added a combined total of almost £50bn to their savings pots last year.
Speaking to the BBC, she said: 'I'm not going to reduce the limit of what people can put into an ISA, but I do want people to get better returns on their savings, whether that's in a pension or in their day-to-day savings.
'And at the moment, a lot of money is put into cash or bonds when it could be invested in equities, in stock markets, and earn a better return for people. But I absolutely want to preserve that £20,000 tax-free investment that people can make every year.'
This statement followed a Martin Lewis post about rumoured changes to the £20,000 cash ISA annual limit.
In a video, shared on his X account, the Money Saving Expert founder asked: "Is the £20,000 cash ISA limit about to be killed off? And if it is and you're a saver, what do you do about it?"
Is the £20,000 cash ISA limit about to be killed off?
And if so what does it mean if for savers, and what should you be doing now… pic.twitter.com/SkJsWen3PI
No, the policy wasn't announced. But, the rumour was that there will be a cash limit from the current £20,000 down to £4000 per year, possibly to be announced at the autumn budget later this year.
Martin Lewis said in his video: "The chancellor, Rachel Reeves has been evaluating cutting the cash ISA allowance. That's not a rumour. I know it for a fact, and it's being talked about in political and policy circles."
But, treasury costings documents that were released with the spring statement already assumed the overall ISA limit of £20,000 remains in place up to and including 2029/30.
The argument for this change is that it could boost the financial market in the UK, with money that might be saved in cash ISAs instead being moved into circulation through assets like stocks and shares. There's also the potential for larger long-term returns that could help more Brits build wealth, though they would also be taking on more risk.
Damien Jordan, founder of Financial Interest and Damien Talks Money says: "I think this sentiment may be missing the mark. I don't think that people avoid investing in the markets because they find the cash allowance more alluring. I believe that people don't invest because they don't understand it and they see it as risky.
"Cutting the cash allowance would not solve this problem. Instead, we need broader education on the benefits of investing long term to encourage investing.'
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Jason Hollands, managing director of online investment platform Bestinvest agrees: 'To get more people investing in equities requires a combination of better education, an appropriate regulatory environment so they can get the help they need in choosing a suitable investment, and the potential carrot of additional incentives.'
He added that 'parts of the City' are 'pushing for an overhaul of stocks and shares ISAs, urging the Chancellor to refocus these on UK equities to help revitalise the UK market'.
He continued: 'Such arguments might appeal to a Chancellor keen to see increased investment in UK domestic assets, but if she is minded to do this then we would urge a carrot rather than a stick-based approach. A mandated limit on overseas investment within Isas would reduce flexibility and returns for savers, and it would be unlikely to drive more people to invest.'
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