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Rachel Reeves has been warned that her rumoured plan to tweak ISAs is a risk, and there is no guarantee that it will result in more investment. Cutting the tax-free cash ISA allowance, which is believed to be in the offing, would also deprive savers, including those who are nearly retirement age, a safe and secure place to store their earnings. Ben Mitchell, Director of Savings at Chetwood Bank, said: “Speculation has been rife in the lead-up to the 2025 Autumn Budget, and ISAs have emerged as a potential focal point for reform.
“This would be a risk, and the Chancellor should resist the temptation to tinker further with ISA rules. Tax-advantaged savings have been subject to constant adjustment since they were called PEPs and TESSAs, evolving from straightforward savings vehicles into something that, despite their popularity, has become unnecessarily complex and confusing.” He added: “Cash ISAs play a clear role; they give people, particularly those approaching retirement, a safe and tax-efficient way to hold cash.
“By providing a simple, secure wrapper safe from volatility and unnecessary tax, savers can de-risk their portfolio when they need to.”
The move may prove ineffective if Ms Reeves decides to go ahead with it, Mr Mitchell warned.
The expert said: “There is no guarantee that changing the ISA rules will lead to more money finding its way into other investment assets, such as stocks and shares.”
He then suggested an alternative.
Mr Mitchell said: “Rather than further tinkering, the priority should be simplification, both of the ISA wrapper itself and of the route to guidance and advice.
“This would benefit investors and product providers alike, helping people make their hard-earned savings work as hard as possible.”
Data shows that, in 2023/24, Brits paid into 9.9million Cash ISA accounts, according to AJ Bell.
Almost £70billion was paid into them that year.
An ally of Reeves previously told the Financial Times: “She wants to see people investing more in British stocks because it’s good for growth and it generates better returns for savers.”
“But we can’t win the argument on our own. Lots of businesses support the idea but never say it.”
