Chancellor Rachel Reeves is lining up an attack our Cash ISAs. Now the fightback has begun.
Rachael Reeves is after our Cash ISAs – but pensioners won’t give up without a fight (Image: Getty)
Earlier this year, Reeves held in talks with City of London investment fund managers, who begged her to slash the £20,000 Cash ISA allowance.
They wanted her to cut the amount that ordinary savers can tuck away in tax-free cash to just £4,000 a year.
Funnily enough, City bigwigs didn’t want her touching the Stocks and Shares ISA, because that’s where they make their money.
They want that kept intact at £20,000, to nudge savers away from cash and into shares, and boost investment in UK companies.
Their motives aren’t entirely altruistic. Fund managers will pocket hundreds of millions of pounds in management charges if savers are pushed into their stock market funds.
Pensioners would be the losers. They love Cash ISAs, with their tax-free interest and zero risk. They don’t want to take a punt on equities in later life.
While Reeves won’t touch existing Cash ISA pots, her plan would slash how much people can squirrel away in the future.
Millions of older savers are fuming, not least because it follows her Winter Fuel Payment raid.
They feel targeted by Labour – and now they’ve found some powerful new allies.
Banks and building societies are warning Reeves to back off. They save the move will hit pensioners, undermine savings and do little to boost investment, according to a report in The Daily Telegraph.
Emma Reynolds, economic secretary to the Treasury, recently met representatives of HSBC, NatWest, Lloyds and others. They told her the policy wouldn’t work.
Stuart Haire, chief executive of Skipton Building Society, said bluntly: “Leave Cash ISAs alone.
David Postings, chief executive of UK Finance, warned savers wouldn’t switch to stocks and shares – they’d just ditch the ISA altogether. “We should encourage investment in a positive way, not by removing options.”
Robin Fieth, from the Building Societies Association, insisted: “The £20,000 ISA limit should be left alone.”
The UK’s 42 building societies rely heavily on Cash ISAs for funding lending, and ISA rule changes could dent their ability to offer mortgages.
Reeves’s plan would line the pockets of the big fund managers, at the cost of smaller mutuals and their customers.
Given that 18 million Britons held Cash ISAs, the backlash could gather force.
There’s a case for encouraging people to invest more in the UK stock market. Long-term returns on equities tend to outstrip cash.
And the London Stock Exchange badly needs support, with flotations drying up and firms eyeing overseas listings.
But forcing pensioners who don’t want to take a chance with their money to buy shares isn’t the answer.
The standard financial advice rule of thumb is to dial down risk as you age. Reeves’s plan would do the opposite, by channelling pensioners into something riskier.
And she couldn’t have picked a worse time to suggest it, as Donald Trump’s crazy tariff policies trigger massive global stock market volatility.
Share values are all over the place. Retired savers don’t want or need that.
Rachel Reeves will shortly launch a quickfire consultation but will cause uproar among pensioners if she pushes her plan through.
But now banks and building societies are pushing back.
