The UK government is exploring reforms to Individual Savings Accounts (ISAs) to improve returns for savers and stimulate investment. A key proposal under consideration involves reducing the annual cash allowance from £20,000 to £4,000.
Currently, there are four main types of ISAs: cash, stocks and shares, lifetime ISAs, and innovative finance ISAs. The original £7,000 limit, introduced in 1999, would be £13,165 if adjusted for inflation.
Financial analyst Moneyfacts commented that while the government aims to foster economic growth through these reforms, it’s crucial to avoid measures that discourage savings.
Caitlyn Eastell, spokesman at financial analyst Moneyfacts, said: “Rachel Reeves remains focused on growing the UK economy so Isa reform could still be on the table, but it is crucial that any undue risks that discourage savings are avoided.”
The small print in the Spring Statement document read: “The Government is looking at options for reforms to individual savings accounts that get the balance right between cash and equities to earn better returns for savers, boost the culture of retail investment and support the growth mission.”
One proposal popular with City bosses is for the annual cash allowances to be cut from £20,000 to just £4,000 – just a fifth of what it is currently.
There are four main types of Isa: cash, stocks and shares, lifetime Isas, and innovative finance Isas.
Isa limits were originally set at £7,000 when the savings accounts were introduced by Gordon Brown, the former chancellor, in 1999. If the limit had increased with inflation, it would now be £13,165.
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