Rachel Reeves faces warnings that her decision to reduce the annual cash Isa allowance will drive savers into the hands of online fraudsters.
The Chancellor announced in November that the tax-free limit would fall from £20,000 to £12,000, with the changes taking effect next year for those under 65.
Challenger bank Starling has cautioned that the £8,000 reduction will trigger a wave of people shifting their money to comply with the 2027 regulations.
This sudden movement of funds creates fertile ground for criminals operating investment scams that lure victims with promises of lucrative returns.
Catherine Britton, who leads fraud risk at Starling, warned that savers attempting to restructure their finances often do so without proper guidance.
“This creates a fraud risk as people try to reallocate funds in order to make their investments work for them – often blindly and being caught up in investment scams,” she said.
The digital bank issued its alert amid a significant uptick in online investment cons, with criminals increasingly deploying artificial intelligence to craft more persuasive schemes.
Starling’s own data reveals that investment fraud incidents surged by 56 per cent during the past year, highlighting the growing threat facing British consumers seeking better returns on their savings.
Rachel Reeves is preparing significant reform to ISA reform | GETTY
Experts have grown increasingly alarmed that AI technology, which enables criminals to replicate voices and physical appearances, will fuel a dramatic rise in attempted cons.
According to City of London Police figures, investment frauds cost victims more than £649million last year.
These schemes typically entice targets with guaranteed returns, most commonly involving cryptocurrency investments.
WhatsApp, Facebook and Instagram serve as the primary channels through which fraudsters operate, frequently funnelling stolen money into crypto exchanges where recovery becomes extremely difficult.
The annual ISA allowance of £20,000 operates on a strict use-it-or-lose-it basis | GETTY
Financial institutions have responded by implementing various protective measures, including blocking transfers to cryptocurrency platforms.
Starling recently launched an AI-powered tool allowing customers to upload conversation records and product listings to identify potential scams.
The Treasury has defended the reforms, arguing they will encourage greater investment in stocks and shares, which have historically delivered stronger returns than cash savings.
Officials emphasise that the generous £20,000 tax-free threshold remains available for those choosing equity investments.
The Government contends that redirecting funds towards productive investment will boost the wider economy
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GETTYA Treasury spokesman maintained that the policy changes would ultimately benefit savers financially.
He added that existing cash Isa holders would not be required to transfer their current savings elsewhere.
The Government contends that redirecting funds towards productive investment will boost the wider economy, though critics remain concerned about the vulnerability of savers navigating unfamiliar financial territory.