Expert reveals true price of Rachel Reeves’ plan to slash the Cash ISA
As rumours continue about the Chancellor’s plans to slash the Cash ISA limit to £4000, experts have come out and raised concerns about the potential consequences to savers across the country
Fears grow over the future of the Cash ISAs as Chancellor Rachel Reeves is reportedly being pushed to slash the tax-free savings allowance. Experts have now warned that this limit could have devastating financial consequences.
With more than 18 million Brits holding a cash ISA and a hefty near £300 billion stashed away, they’re a cornerstone of British savings.
Carol Knight, CEO of The Investing and Saving Alliance (TISA) has said that government’s rumoured move to reduce the tax-free savings limit on Cash ISAs would not encourage savers to invest in stocks and shares ISAs. She said the real barriers to investing are lack of confidence, knowledge, and fear of risk.
In the Daily Mail, Knight wrote: “Slashing Cash ISA tax relief won’t create the investment culture the Chancellor seeks, tackling the real barriers to investing will.”
The reason for the rumoured cuts to the Cash ISA is to divert money away from savings and into stocks and shares.
Emma Reynolds, Economic Secretary to the Treasury, made a rousing call last week for cash to divert into the stock market to fire up economic growth. Customers have the choice between earning interest on their savings with cash ISAs or rolling the dice with stock market-linked returns in stocks and shares ISAs.
In a bold pitch to the House of Lords committee, Ms Reynolds slammed the status quo: “Why do we have hundreds of billions of pounds in cash Isas? … What can we do together in parliament about trying to drive an investment culture that realises cash is not a good investment, especially in a high-inflation environment?”
However, Knight argues that by lowering the contribution cap, savers may find themselves unable to maximise the benefits of tax-free interest, which could hinder long-term savings growth.
She has urged the government to reconsider and warned that rushing these changes could lead to unintended consequences, harming consumers’ financial wellbeing and emphasised the importance of educating consumers about long-term investing.
Robin Fieth, Building Societies Association CEO, said: “Cash ISAs help consumers to achieve their savings goals. They play an integral role in the UK savings market and have done for many decades. They represent a policy success upon which we should seek to build, rather than to curb.”
For the latest breaking news and stories from across the globe from the Daily Star, sign up for our newsletters.
