Savers across the nation are up in arms over potential changes to their beloved Cash ISAs, which currently hold over £300 billion in tax-free savings. Recent proposals being considered by Rachel Reeves have ignited fierce opposition among savings experts and everyday investors alike.
At the heart of the controversy is the suggestion that some Cash ISA funds could be shifted into Stocks and Shares ISAs. Savings experts have slammed the idea. Anna Bowes at The Private Office called the proposal “outrageous”, insisting that many ISA savers are risk-averse and have no desire to invest in volatile markets, according to the Express.
Older savers, in particular, rely on the stability of cash savings to supplement their state pension and cover essential bills like food and energy. For those in their 70s or 80s, a sudden downturn in the stock market could spell disaster. While share prices historically recover over time, the potential delay in recovery could prove ruinous for those with immediate financial needs.
The looming threat has led financial advisers to issue urgent recommendations. “If you’re worried, there’s a simple response. Max out this year’s £20,000 Cash ISA allowance before the Spring Statement on March 26,” they advise, urging savers to secure their cash savings before any drastic policy shifts take effect. Reeves is less likely to target money that has already been tucked away, but further cuts in allowances remain on the table.
Meanwhile, City fund managers argue that reallocating billions from cash to UK shares could boost the economy, promising higher long-term returns and extra fees from increased fund activity. They highlight a compelling statistic: over time, Stocks and Shares ISAs have delivered far superior returns to Cash ISAs. Vanguard figures reveal that £10,000 invested in a global mix of shares via the FTSE All World Index in 1998 would have grown to £59,825 by the end of 2024, compared to just £18,695 in a typical cash account.
Moneyfacts data supports this view, showing that the average Stocks and Shares ISA returned 9.64% a year over the last 10 years, while Cash ISAs managed only 1.21%. In real terms, a Stocks and Shares ISA would have turned £10,000 into £25,101, with all dividends reinvested, whereas cash savings would have barely reached £11,278.
Despite these impressive figures, experts caution that the decision to invest in shares is a personal one, hinging on an individual’s risk tolerance and financial goals. “A Stocks and Shares ISA has a better track record of building long-term wealth than a Cash ISA, provided you can withstand the short-term volatility,” they note. Ultimately, the choice should be left to savers themselves. The decision should be up to you. Not Rachel Reeves.
