Chancellor Rachel Reeves is being urged to consider “removing many restrictions” placed on ISAs under a radical savings proposal, which is being floated by a key figure in the UK fintech sector.
The Treasury is currently reshaping the UK’s ISA framework, with the most significant adjustment targeting cash savings. Beginning in April 2027, individuals under 65 will see their annual cash ISA contribution limit fall to £12,000, down from the current threshold
Those aged 65 and above will retain access to the full £20,000 cash ISA allowance. The stocks and shares ISA remains untouched, with savers still permitted to invest up to £20,000 annually in this wrapper.
The overall yearly ISA limit stays at £20,000, which can be allocated entirely to investments or divided across different ISA categories. Ministers have stated their objective is steering more money into equities rather than cash deposits, where inflation frequently diminishes real returns.
The Chancellor is being urged to go further when it comes to her ISA reforms
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GETTY
Speaking to GB News, Wander Rutgers, chief executive officer of investment platform Lightyear, has welcomed the Government’s underlying rationale for the changes.
“I think we can really celebrate the fact that the Government understands that Britain is a nation of savers, and the more they invest, that will be in their long term benefit,” Mr Rutgers said.
The fintech boss acknowledged the importance of grasping what problem policymakers are attempting to address. When speaking with people about why they avoid investing,
Mr Rutgers noted that complexity emerges as a recurring barrier, with potential investors citing numerous steps and obstacles as deterrents. Despite welcoming the Government’s goals, Mr Rutgers expressed reservations about the direction recent proposals have taken.
Examples of tax free Isa earnings in the UK if you had £20,000 in the Isa | GBN
He pointed to measures such as capping cash ISA contributions, introducing barriers to transferring funds between cash and stocks and shares ISAs, and restricting the range of instruments available within investment wrappers.
“I think that’s the wrong way to go. I think that creates more fear for people. Another reason not to invest,” he said.
The Lightyear chief argued that rather than simplifying the path to investing, these changes risk erecting additional hurdles that could discourage participation altogether.
He highlighted positive developments from the previous year, including the introduction of fractional shares within stocks and shares ISAs, which enabled people to begin investing with smaller sums.
By investing in the stocks and shares ISA rather than the cash ISA | GETTY
However, he suggested more recent announcements have moved in the opposite direction. Mr Rutgers proposed a radically different approach: merging cash and stocks and shares ISAs into a single unified product. He advocated for stripping away many existing restrictions on permissible investments within the wrapper.
“I would go completely the other direction and actually create one ISA, combine the cash ISA instruction shares ISA, remove many of the restrictions on instruments so that when people can invest, they can actually very easily graduate from a cash ISA to a shared product,” he explained.
Such a system, he argued, would dramatically improve how readily people comprehend investing.
The Treasury has not indicated any appetite for consolidating ISA types, with its current strategy focused on incremental adjustments rather than wholesale restructuring of the tax-free savings system.