Cash ISA limit reduction abandoned by Reeves
Chancellor Rachel Reeves has confirmed that the government will not cut the £20,000 limit on cash ISA deposits, after speculations that the limit could be slashed to encourage investment.
Speaking to the BBC, Reeves said: “I’m not going to reduce the limit of what people can put into an ISA, but I do want people to get better returns on their savings, whether that’s in a pension or in their day-to-day savings.”
“At the moment, a lot of money is put into cash or bonds when it could be invested in equities, in stock markets, and earn a better return for people. But I absolutely want to preserve that £20,000 tax-free investment that people can make every year,” she added.
In the Spring Statement earlier this year, Reeves confirmed that ISA reform was on the horizon, with changes to the regime expected to be announced in the Autumn Budget or July’s Mansion House speech.
Reforms still on the cards
While pensions minister Torsten Bell confirmed at the start of this month that the cash ISA would not be scrapped completely, the government had clearly set its sights on reforming the investment vehicle.
“Why have we got hundreds of billions of pounds in cash ISAs? We have failed to drive an investment culture,” City minister Emma Reynolds said at a Lord committee in February.
Rumours had circulated that the government would slash the limit to as low as £4,000, while City broker Peel Hunt recently recommended cutting the cash limit to £5,000.
After pledging to reform ISAs before the election last year, Reeves had been vague about how they would change the investment vehicle, saying that the government was looking at options to “get the balance right between cash and equities to earn better returns for savers, boost the culture of retail investment, and support the growth mission”.
Last week, City minister Reynolds met with major bank bosses, such as HSBC and LLoyds, who warned against reducing the limit and said the changes would fail to meaningfully improve investment and growth.