MPs ‘not satisfied’ Chancellor’s money Isa restrict minimize to £12,000 will lead to investing growth

MPs ‘remain to be convinced’ the Government’s cut to the cash Isa allowance, unveiled in the Autumn Budget will spark a culture of investing in stocks and shares instead of keeping savings in cash.

The Government has responded to recommendations from MPs on the Treasury Select Committee about changes to the cash Isa allowance in a report issued in October ahead of the proposed cuts.   

Dame Meg Hillier, Chair of the Treasury Committee today said: ‘I remain to be convinced that these reforms will drive the cultural change that Ministers want to see.’

Before the Budget, the Select Committee said the Government should not cut the cash Isa limit in the hope of persuading people to move to stocks and shares.

MPs on the Select Committee said: ‘Reducing the cash Isa’s tax-free allowance, and the publicity which would have to go alongside such a reduction, is unlikely to increase the level of saving in shares [in] the UK.’

Not convinced: The Chair of the Treasury Select Committee says she remains to be convinced the Isa reforms announced in the Budget will make savers invest

In the Autumn Budget, the Chancellor announced that the cash Isa allowance will be slashed to £12,000 a year from April 2027, but only for under 65s.

It means from 6 April 2027, savers under the age of 65 will only be able to put a maximum of £12,000 into a cash Isa and if they want to use the whole wrapper, the remainder – £8,000 – can go into stocks and shares. 

The Chancellors’ decision to cut the cash Isa allowance is part of a plan to divert billions of pounds sitting in savings accounts into investments. 

It is thought that around 40 per cent of the £726billion held in Isas is held in cash rather than stocks and shares. 

Typically, over the long-term, investing beats savings with better returns on offer – but many Britons see investing as risky compared to guaranteed interest from a cash Isa. 

The Economic Secretary to the Treasury, Lucy Rigby, defended the changes to the cash Isa allowance. 

She says: ‘The Government wants to see more people benefit from the higher returns and long-term financial resilience that investing can provide. 

‘That is why the Chancellor has set out a series of bold measures to get Britain investing again, including the reforms to Isas made in the Budget.’

Dame Hillier says: ‘In her proposed changes, the Chancellor risks complicating the Isa landscape and confusing consumers.

‘It is now clear where the Government stands on the issue. The next step is to see how this complex product will be delivered in the real world.’