A group of stakeholders has written an open letter to the Chancellor calling on the government not to cut the current Cash ISA limit.
Chancellor of the Exchequer Rachel Reeves is expected to cut the £20,000 Cash ISA allowance in the Mansion House speech next week to boost investment in UK companies.
The cohort of signatories described Cash ISAs as “a cornerstone of personal savings” for millions of people across the UK and warned any cuts to the allowance would “send a discouraging message to savers, who are sensibly trying to plan for the future and undermine a product that has stood the test of time”.
According to HMRC figured sourced by the Building Societies Association, over 18 million people have a Cash ISA of which 47% have incomes of less than £20,000 a year.
The letter also argued that Cash ISAs are an important source of funding for banks, building societies, credit unions and other providers, which use the deposits to fund loans to households and businesses, and diminishing the role of Cash ISAs could lead to higher borrowing costs and reduced access to credit across the economy.
BSA CEO Robin Fieth said: “Cash ISAs are used for a wide range of purposes – from saving for a first home to managing finances in retirement. These are not idle funds; they serve real, practical needs for both savers and the building societies, banks and other providers that receive the funds, and use them to support mortgage and other lending.
“Simply changing ISA limits is unlikely to encourage people to invest, but it will hurt people who are responsibly saving for short-term goals, where investing may not be appropriate.”
Cecilia Mourain, chief homebuying and savings officer at Moneybox, added: “Cash ISAs are vital for building financial resilience, and reducing the tax-free allowance is unlikely to deliver on its intended objectives.
“Instead of supporting the government’s ambition to build a stronger investing culture, it will discourage sensible saving behaviour, weaken demand for a popular product and disrupt the flow of capital that supports mortgage lending and economic stability.”
