Investment - Articles - Cash ISA allowance may be cut from £20,000 to £12,000

Sarah Coles, head of personal finance, Hargreaves Lansdown: “We need an investment culture in the UK, and some of the money that has been saved in cash ISAs would work harder for people if it was invested instead, but there’s no evidence that cutting the cash ISA allowance would encourage them to make the change.

There will be people for whom cash ISAs are the most sensible home for their money, especially if they’re saving for the short term, have significant sums of cash and are a higher earner.  When HL surveyed clients as to what they would do in the event of a cut, they were equally likely to say a cut in the allowance would mean saving elsewhere as they were to say they would invest instead.

There will be those who should be investing instead, but the gamechanger here will be changes in the pipeline to allow businesses to provide more targeted support and give people the help they need to take advantage of the enormous growth potential of investment. It’s the carrot that’s going to be effective here: not the stick.

Savings can act as a gateway to investing too. It’s certainly something we see with our clients, so they begin by opening a cash ISA, and as they build their understanding of investments, they transfer this money into a stocks and shares ISA. The current system makes this straightforward, because there’s flexibility over transfers, so it’s easy to move from cash to stocks and shares and back again. If this change is introduced, the government needs to focus on keeping journeys as simple as possible for clients.”