Cash ISA allowance announcement: ‘Could impact vulnerable people’

Following the news about the cuts to the Cash ISA allowance, here is some commentary from Rob Morgan, Chief Investment Analyst at Charles Stanley.

 
Rob Morgan, Chief Investment Analyst at Charles Stanley, comments: “The Chancellor’s ambitions are clear – cut the cash ISA allowance to encourage savers to move towards a Stocks & Shares ISA instead, and in that, bring a much-needed boost to the British economy and long-term wealth.

“It’s not always so simple though. This will require, presumably, a reform of the transfer rules to prevent the transfer of a Stocks & Shares ISA (with a higher annual limit going forward) being moved to a Cash ISA. Presently there is no restriction and an ISA can be transferred freely between the different types, something very much valued as ISA accounts can be readily repurposed for different objectives as circumstances change.

“For savers, some concern is warranted. A cash ISA is a convenient and appropriate home for money that is required to be drawn upon in the short term. Sadly, any move could impact people, including some vulnerable people, for whom taking risk in a Stocks & Shares ISA isn’t appropriate, such as those utilising it for a house deposit, or funding later-life care. However, for those in the know, there are options within Stocks & Shares ISA like money market funds, which could mitigate these risks. Whatever happens, having a plan in place and doing proper research on the impacts for your money is critical.”

Key stats to supplement stories on this topic:

• A quarter (24%) of ISA savers are not aware there is a tax deadline for their £20,000 ISA allowance, according to new research from Charles Stanley.
• 31% of Gen Z’s are unaware there is a tax deadline for their yearly ISA allowance

• 27% of millennials are unaware there is a tax deadline, compared to 22% of Generation X and 11% of Baby Boomers

• 13% who have more than £20,000 in savings are not aware there is a tax deadline for their yearly ISA allowance
  • 21% of those with savings between £15,001 and £20,000 are also not aware of the ISA deadline
  • 25% of those who have a savings pot between £10,001 and £15,000 are not aware, meaning they could be losing out on earning tax free interest.
• When thinking about ‘ISA season’, 28% of ISA holders say it prompts them to top up their cash ISA just so their savings are protected
  • This is compared to 20% who top up their investment ISA so their investments are protected
• 18% say they know they can’t fulfill the full ISA allowance of £20,000, so don’t pay any more into their ISA than they already do
  • 17% of those who have savings between £15,000 and £20,000 say they know they can’t fulfill the full ISA allowance, so don’t contribute more than they need to.

Methodology for research:

The research was conducted by Censuswide, among a sample of 3,001 ‘mass affluent’ consumers, aged 18+ (defined as those earning above the UK average pre-tax salary (£33,000) AND with at least £1,000 in accessible cash/savings). The data was collected between 14.02.2025 – 21.02.2025. Censuswide abides by and employs members of the Market Research Society and follows the MRS code of conduct and ESOMAR principles. Censuswide is also a member of the British Polling Council.