Furious campaigners are fighting back against rumoured proposals to gut the popular Cash Isa scheme, with ministers rumoured to be plotting a drastic cut in the annual tax-free savings allowance from £20,000 to just £4,000.
The potential move has sparked alarm with nearly 8 million savers who rely on the tax-free accounts now fearing they could be forced into potentially riskier investments in stocks and shares ISAs so their funds keep their tax-free status.
The Building Societies Association (BSA) has spearheaded a passionate campaign to protect Cash Isas, releasing research that shows overwhelming public opposition to the drastic change.
A staggering 73% of UK adults with Cash Isas oppose the government’s rumoured plans, they say, with many furious that their hard-earned savings could be under threat.
The concern isn’t just about the cut itself – it’s about where that money might be forced to go.
The potential move has sparked alarm with nearly 8 million savers (Image: Getty)
Some financial firms claim the move is designed to push savers towards riskier stock market investments where returns are higher rather than the safe, guaranteed returns of a traditional savings account. However, advocates say the change could be a win for savers, by boosting their returns, and for the UK economy.
Chancellor Rachel Reeves has hinted that she wants to create “more of a culture in the UK of retail investing like you have in the US.”
But critics argue that slashing Cash Isas could just push British money into American tech giants such as Apple, Amazon, and Tesla – doing little to boost the UK economy.
Financial guru Martin Lewis has waded into the row, warning that some savers are already considering withdrawing their money due to the uncertainty. “I’ve already had people telling me they are worried about what’s going on, so they are going to withdraw from Cash Isas, which is clearly not the right thing to do,” he told MPs.
While Reeves has remained tight-lipped on the final decision, her comments suggest the Treasury is keen to ‘rebalance’ savings incentives to encourage more stock market investment. But with 90% of Cash Isa holders saying they value the security of guaranteed returns, critics warn that the government is out of touch with ordinary savers.
Supporters of the proposed changes argue that the UK must move towards a more investment-friendly culture.
Figures from investment platform AJ Bell claim that over 25 years, stock market investments have massively outperformed cash savings.
A hypothetical £1,000 put into an average Cash Isa in 1999 would be worth just £2,016 today – barely keeping up with inflation. Meanwhile, the same sum invested in global equity funds could have grown to £4,641, or even £5,964 if placed in a fund tracking North American firms.
Laura Suter of AJ Bell insists that while Cash Isas are great for emergency savings, stocks and shares Isas offer far greater long-term potential. She told the :“If you’re saving for a house deposit, home improvements, or even retirement, then a stocks and shares Isa could be a more effective route.”
The pressure is now mounting on Reeves and her team to listen to savers and financial experts alike.
BSA chief Robin Fieth has made it clear that the fight isn’t over. “It’s clear many people are making a conscious decision to save in cash rather than stocks and shares,” he argues. “We will continue to press the chancellor to listen to all sides of the Cash Isa argument – not just the loud voices of self-interested big businesses.”
No decision on the future of Cash ISAs has yet been announced. Reeves is due to make a spring statement on March 26, where it is thought she would announce any Cash ISA changes.
She had previously told broadcasters: “It’s really important that we support people to save to achieve their aspirations.“At the moment, there is a £20,000 limit on what you can put into either cash or equities (ISAs) but we want to get that balance right.
“I do want to create more of a culture in the UK of retail investing like what you have in the United States, to earn better returns for savers.”