Rachel Reeves is believed to be planning to reform ISAs in an effort to spark investment. (Image: Getty)
New research has suggested that UK savers are against Rachel Reeves' reported plan to change ISAs, according to experts. As she aims to get savers to invest their cash into stocks and shares, the Chancellor is believed to be plotting to slash the tax-free limit of a cash ISA from ￡20,000 to ￡10,000. At the moment, account holders can deposit ￡20,000 a year without paying tax across all types of ISAs, including cash, stocks and shares, lifetime, and innovative finance accounts.
Specialists at Nottingham Building Society said their study - which surveyed 2,003 UK respondents who have or have previously had Cash ISAs - showed that 55% of all savers oppose the move, rising to 76% of over-55s. 78% of the respondants believe the Government should be encouraging tax-free saving through tools like Cash ISAs, not discouraging it. Meanwhile, only 38% of Cash ISA holders would consider switching to a Stocks and Shares ISA if the allowance is cut, while one in three – equivalent to an estimated 2.5million people – said they’d simply save less.
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Savers could face a tweak to ISA rules. (Image: Getty)
The figures also revealed a fifth (20%) of cash ISA savers said a cut to the allowance would affect their ability to put down a deposit on a home - rising to 41% among 25–34-year-olds.
Meanwhile, 34% fear it would hit their retirement saving, and 36% say it would harm their ability to build an emergency fund.
This week, Ms Reeves confirmed as part of her Leeds Reforms that long-term asset funds can be included in stocks and shares ISAs from next year.
The Government, she added, will continue to consider reforms to ISAs and savings to strike the right balance between cash savings and investment.
Harriet Guevara, Chief Savings Officer at Nottingham Building Society: “We’re pleased the Chancellor has opened the door to proper consultation on ISA reform. Any changes to a system that millions rely on to build financial security must be based on evidence and real-life saver behaviour.
“The Cash ISA allowance is a mainstream tool used by everyday people to manage their money sensibly.
"More than half of our fixed-rate ISA customers used the full ￡20,000 allowance last year, and among those saving in-branch, that figure rises to 65 per cent. This shows that for many, the Cash ISA is a lifeline.
The Government is aiming to spark economic growth. (Image: Getty)
“We support the government’s aim to boost investing and grow the economy, but limiting savers’ choices by cutting the Cash ISA allowance is not the right way to do it."
She added that such a move risks "pushing people into riskier products they don’t want or understand", would "undermine confidence in saving just when we need it most".
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Ms Guevara said: “It also has direct consequences for mortgage lending. ISAs held with mutuals like Nottingham Building Society support lending to aspiring homeowners.
"Capping what people can save risks capping what we can lend, and that’s directly at odds with the government’s goal of doubling the size of the mutual sector.
“This consultation must put the saver at the centre. That means retaining choice, rewarding good savings behaviour and supporting financial resilience for the long-term.”
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