The Chancellor has abandoned a plan to reduce the Cash ISA allowance from £20,000 to £12,000 for people under 60, according to Daily Business. The proposal, inherited from predecessor Rachel Reeves, had drawn widespread criticism for making an already complicated savings market harder to navigate, with little proof it would push more people towards long-term investing.
Key points
- Allowance kept — the £20,000 Cash ISA limit stays for under-60s.
- Criticism of the plan — commentators said it added complexity without evidence of benefit.
- New products announced — the Budget also includes ISAs aimed at first-time buyers and would-be investors.
- Industry split — one consultancy welcomes the move; an investment platform calls it a missed chance.
Paul Riseborough, a partner in KPMG UK's financial services consulting practice, said keeping the £20,000 cash allowance would be welcomed by savers and lenders, especially smaller building societies that depend on cash deposits to fund mortgages. He said changing the limit was never likely to turn the country into a nation of investors, noting that 87% of cash ISA holders said they would not move into stocks and shares whatever the lower cap. He also warned that constant tinkering with ISA rules risks undermining one of the product's main attractions: its simplicity.
Not everyone is pleased. Michael Healy, chief executive of IG Consumer, said the Chancellor had "squandered a golden opportunity" to help households build long-term wealth and direct more money into growing businesses. He argued that protecting tax incentives for holding cash rather than investing was misguided at a time when Britain needs growth, pointing to a £26.1 billion rise in cash ISA subscriptions last year — more than four times the increase in Stocks & Shares ISAs. He also cited IG modelling suggesting that phasing out cash ISAs for new contributions could raise up to £610 million a year in extra tax revenue by 2032-33 without affecting existing savings.
What it means in practice
For most savers, nothing changes: the £20,000 cash limit stays as it is, so there is no need to shift money or rush any decisions before the tax year ends. The bigger question is whether the new ISA products are worth a look, and whether your savings are sitting in cash when you could be investing for the longer term.
- Check your ISAs — your existing arrangements are unaffected, so no action is needed.
- Watch the new products — details of the first-time buyer and investor ISAs will matter if you are planning a purchase or starting to invest.
- Think long term — cash suits short-term goals; if your horizon is years away, it is worth reviewing whether cash is really where you want it.
