Unews World
Chancellor Rachel Reeves is aiming to foster a “culture of retail investing” in the UK, and is looking at reducing the annual cash ISA allowance.
Reeves met with City executives this week to discuss strategies for encouraging greater investment in stocks and shares, aiming to deliver “better returns” for savers.
Following the meeting, reports emerged suggesting Reeves is considering a significant reduction in the cash ISA limit, potentially lowering it to £4,000 from the current £20,000, according to The Daily Telegraph. This move could channel savings away from cash and into investment vehicles.
Asked about the potential limit on Thursday, Rachel Reeves told broadcasters: “It’s really important that we support people to save to achieve their aspirations.
“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.
“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.”
The cash Isa and stocks and shares Isa are the two main types of Isa savings accounts available to consumers.
The £20,000 annual limit on cash Isas has been in place since 2017 – before then it was £3,000.
More than 18 million people hold savings in a cash Isa, with about £300 billion stored in them.
Savings providers have said they are preparing to fight any move to bring down the deposit limit on a cash Isa.
Tom Selby, director of public policy at investment firm AJ Bell, told the PA news agency it is “hard to imagine” an Isa system that does not let investors hold a significant chunk of their savings in cash.
Get a free fractional share worth up to £100.
Capital at risk.
Terms and conditions apply.
Get a free fractional share worth up to £100.
Capital at risk.
Terms and conditions apply.
He added that reducing the limit “may seem superficially attractive but there is no guarantee this money would then be deployed in long-term investments”.
Meanwhile, trade group the Building Societies Association has previously warned of knock-on impacts of curbs on cash Isas.
Banks and building societies use the deposits to fund loans to households and businesses.
The association warned that reducing them would mean less money flowing into banks and building societies, which would restrict lending and push up mortgage prices.
It comes after the economic secretary to the Treasury, Emma Reynolds, said the UK needs an investment culture “that realises cash is not a good investment”.
She told a committee meeting in the House of Lords earlier this month: “Why do we have hundreds of billions of pounds in cash Isas?”
Source link
