Experts urge calm as Rachel Reeves eyes a £10k cap on cash ISAs

Savers are being urged to “not panic” amid growing fears that Chancellor Rachel Reeves is preparing to slash the tax-free limit on Cash ISAs by half in a controversial bid to force more people into the stock market.

The move, expected in the Autumn Budget, would see the current £20,000 allowance – which can be held entirely in cash – cut to just £10,000, with anything over that pushed into stocks and shares ISAs.

It is a decision that has left many savers, particularly the risk-averse and elderly, concerned. Critics say it amounts to financial coercion disguised as investment strategy.

Currently, Brits can invest up to £20,000 annually tax-free across all ISAs – including Cash ISAs, Stocks and Shares ISAs, Lifetime ISAs and Innovative Finance ISAs – with no restriction on how much can be held in cash.

But Reeves, reportedly under pressure from powerful City lobby groups and think tanks, is said to be preparing to ringfence half of that allowance for investment products – a move campaigners warn could penalise prudent savers.

'Nothing’s confirmed – don’t panic'

Financial experts speaking to Newspage were unanimous in their call for calm – but many warned that the Chancellor’s proposal could backfire.

Philly Ponniah, a chartered wealth manager and financial coach at Philly Financial, said: “There’s a deep knowledge gap in the UK when it comes to investing, and potential policies like this one completely ignore that reality. The idea that capping tax-free cash savings will nudge people into the stock market assumes fear, confusion and a lack of education aren’t huge barriers, but they are.

“This proposal doesn’t empower people to invest, it pressures them, which is not the same thing. If you have a Cash ISA, don’t panic, nothing’s confirmed yet.”

She advised savers to review their financial goals, adding: “Cash feels safe, but inflation erodes its value over time. Wealth is built through investing, but only when people have the confidence and support to get started. Education should come before restriction.”

‘Electoral suicide’

Samuel Mather-Holgate, independent financial adviser at Mather and Murray Financial, questioned whether Reeves would risk the backlash.

He said: “This Government, and this Chancellor, are so unpopular now that this would be electoral suicide. It simply can't happen. However, if you don't need your cash in the next five years, you should really be investing your money rather than keeping it in cash. Cash is the only way you are sure to erode its value over the long term.”

‘Utterly delusional’

Some experts dismissed the proposal as ineffective policy theatre. Wes Wilkes, CEO at IronMarket Wealth, said: “The Government and think tanks are completely out of touch. If they think halving the Cash ISA allowance is going to make a jot of difference to UK-centric investing, they’re utterly delusional.”

“Cash ISA holders either use them for cash reserves or because they’re still scared to invest. £10k a year isn’t going to make a jot of difference to the way people think or behave. It's a pointless waste of policy and paper.”

‘No need to move your money’

Chartered financial planner Anita Wright reassured savers that their current ISA holdings are safe.

She explained: “If you hold a Cash ISA, proposed changes are unlikely to affect existing funds. Any reduction in the cash ISA allowance would not apply retrospectively, and transfers between providers would still be permitted. There is no need to take immediate action unless it aligns with your broader financial objectives.”

She added that for some, standard savings accounts might even be more rewarding: “For basic rate taxpayers, £20,000 in a standard savings account may yield higher returns than a Cash ISA, especially with the £1,000 personal savings allowance allowing interest to be earned tax-free.”

‘Nanny state tinkering’

Kundan Bhaduri of The Kushman Group issued a blistering rebuke, branding the plan “nanny-state tinkering of the highest order”.

He warned: “It’s the State attempting to socially engineer cautious savers – many of whom are older and rely on the security of cash – into becoming reluctant stock market speculators. It’s a classic case of Whitehall deciding it knows better than you do what to do with your own money.

“So, what should you do now? First, breathe. Don't panic based on whispers just yet. To the sensible saver, it would be utterly logical to utilise your full £20k cash allowance for this tax year, while the freedom to do so remains unequivocally yours.”

‘Use your allowance now’

Colin Low, Managing Director at Kingsfleet, agreed that now may be the time to act – but calmly.

He said: “It would be highly unlikely for current Cash ISAs to have their terms amended retrospectively, so if you still want to maximise your tax-free savings, then make sure that you use your current year allowance (£20,000).”

“Where funds are needed short-term, then it’s all about maximising deposit-based returns. If the longer term is an option and an investor can tolerate greater risk, then Stocks and Shares ISAs should still form part of an investor’s planning.”

‘Foolish move’

Scott Gallacher, director at Rowley Turton, concluded: “Whilst it’s just a rumour at this stage, savers are right to be concerned given the repeated reports about the Cash ISA allowance potentially being slashed.

“That said, I think it would be a foolish move by the Government, which is already under pressure and risks alienating cautious savers who rely on Cash ISAs for security and peace of mind.”

His advice? “Savers don’t need to panic. The speculation is about reducing future ISA allowances, not about affecting money already held in existing ISAs. So if you’re likely to be affected by the suggested changes, my advice would be to maximise your ISA contributions sooner rather than later while the current rules remain in place.”