UK (Parliament Politics Magazine) – Chancellor Rachel Reeves is reportedly planning to lower the annual cash ISA deposit limit from £20,000 to £4,000 to encourage stock investments.
As reported by The Independent, amid speculation over a potential reduction to cash ISA deposit limits, the Chancellor has expressed her goal of cultivating a retail investment culture for improved savings returns.
What did Chancellor Rachel Reeves say about cash ISA limits?
Addressing concerns over a possible cap on Thursday, Ms Reeves stressed the importance of supporting individuals to save and work towards their financial goals.
She stated,
“At the moment, there is a £20,000 limit on what you can put into either cash or equities (ISAs) but we want to get that balance right,”
adding,
“I do want to create more of a culture in the UK of retail investing like what you have in the United States, to earn better returns for savers.”
Ms Reeves engaged with top financial executives earlier this week, where they reportedly discussed ways to drive greater public investment in shares and financial markets.
Following the meeting, reports revealed that the Chancellor may introduce a £4,000 annual cash ISA deposit limit, a significant drop from the existing £20,000 threshold.
What did Tom Selby say about the proposed ISA limit cut?
The director of public policy at AJ Bell told the press that an ISA system without the option for investors to retain a significant share of their savings is “difficult to envision.”
He warned that lowering the limit may look beneficial at first appearance, but “there is no guarantee this money would then be deployed in long-term investments.”
What has the Building Societies Association warned about cash ISA limits?
The Building Societies Association has raised concerns over cash ISA restrictions, warning of wider economic consequences.
Deposits in cash ISAs enable banks and building societies to issue loans for individuals and companies. The association warned that cutting cash ISA deposits could shrink the cash flow into banks and building societies, restricting loans and driving up mortgage prices.
This follows remarks from the Economic Secretary to the Treasury, who has stressed the need for an investment culture in the UK, arguing that cash is not an ideal investment option.
How did Rachel Reeves respond to defence spending?
When a question asked if she plans to accelerate the government’s goal of allocating 2.5% of GDP to defence spending, she did not answer.
She refrained from directly replying to the question but reiterated her “absolute commitment” to the target, stating that a “strong economy” relies on maintaining “strong defences.”
Ms Reeves said, “We will set out that pathway to 2.5% of GDP – we’ll do it properly.”
Two main types of ISA accounts
Individuals have access to two major types of ISA savings accounts: Cash ISAs and Stocks and Shares ISAs.
More than 18 million people have savings in cash ISAs, collectively holding a total of £300 billion. Financial institutions have signalled their intent to oppose any plans to slash the deposit limit.
The cash ISA deposit limit, which currently remains at £20,000 per year, saw a significant rise from the previous cap of £3,000 before the 2017 revision.