Rob Hillock, Head of Personal Financial Planning at Broadstone: “Cutting the cash ISA limit to £12,000 later this decade is a strong signal that the Chancellor wants more people investing rather than holding large amounts of cash. This would help potentially boost long-term returns for savers and will also enable the Government to channel more capital into UK equities and the wider economy. Protecting the full cash ISA allowance for over 65s is a smart move that will enable pensioners to de-risk as they enter retirement, recognising a greater need for more accessible and lower-risk savings, but further limits tax efficient vehicles for those under 65 looking to save securely.”
Steven Cameron, Pensions Director at Aegon, said: “The Chancellor has taken the unpopular decision to limit the amount which under 65s can pay into a cash ISA each year to £12,000 from April 2027. Time will tell if this blunt intervention will deliver on its intended purpose of turning those with more cash savings than they need in the short term into investors. We agree that many customers may not have the best balance between cash savings and stocks and shares investments. Those saving up to £20,000 each year into a cash ISA are losing out on the potential to benefit from the greater growth prospects of stocks and shares investments. But rather than the ‘stick’ of a new lower limit, we would have preferred more use of the ‘carrot’ of more guidance on savings versus investments. From next April a new ‘Targeted Support’ service will be available, which could equip more people to make the right financial decisions for themselves. This includes understanding the benefits of moving excess cash into a stocks and shares ISA, potentially benefitting from much higher returns, albeit at the expense of the ‘no loss’ security of cash savings. This may be particularly appealing to those who are not prepared to pay for financial advice and is likely to be offered free of charge. Overall, the new rules around cash ISAs will also increase the complexity of ISAs and monitoring against limits. We need to examine the detailed rules including any around whether individuals will still be able to transfer existing stocks and shares ISA funds into cash ISAs, circumventing the new limit.”
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