The cash ISA may be safe for now but Rachel Reeves may look to scrap other ISA products (Image: Getty)
Chancellor Rachel Reeves has put off making any changes to the , but experts are predicting she could look at simplifiying or scrapping other products that come under the ISA umbrella. had been under fire for reportedly planning to either scrap the cash ISA or reduce the £20,000 annual allowance, replacing it with a cap of £4,000.
The proposals, which were touted as a way to boost the UK’s economy by encouraging more savers to take out stocks and shares, will not be announced in the upcoming .
But Reeves is being urged to consider simplifying or scrapping more obscure ISAs, including the Lifetime ISA and the Innovative Finance ISA.
Mike Penny, wealth consultant at Simplify Consulting told IFA Magazine the Lifetime ISA’s limit had remained frozen at £4,000 since it launched in 2024. The LISA pays savers a bonus of 25% but they have to use their savings to either buy a home or spend it when they retire, otherwise there is a 25% withdrawal charge.
Penny said: “Simplifying ISAs will also be of benefit to product providers who can reduce system complexity and improve the efficiency of their processes, whilst ultimately understanding the target market for each ISA.”
The innovative finance ISA allows savers to use their £20,000 tax-free savings allowance to invest in more risky assets including peer-to-peer loans, some types of company debt, and bonds issued by charities
But it has not been as popular as stocks and shares ISAs and many savers have been put off by fear that they would not get their cash back.
Rachael Griffin, tax and financial planning expert at Quilter told The i Paper ISAs needed to be simplified: “We would welcome a simplification of the ISA system, as the brand has become increasingly confused with multiple different products and restrictions,” said Griffin.
“Making ISAs easier to understand and use would encourage more people to engage with them, particularly younger savers. Any reform should also maintain strong tax incentives to ensure ISAs remain a compelling option for long-term wealth-building.”
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Baroness Helena Morrissey, founding ambassador of AJ Bell Money Matters and a former fund manager at Legal & General, said merging cash and stocks ISA could help plug the gender ‘cash ISA gap.
She said: “Theaverage man with an ISA holds £3,000 more than a woman with an ISA, for cash and stocks and shares ISAs combined – it means women hold on average 10% less in their ISAs than men, according to data.”