A leading UK building society has issued a stark warning to savers, declaring it "now more important than ever to protect savings" following a major government announcement on tax rules.
Chancellor Confirms ISA Allowance Reduction
Labour Chancellor Rachel Reeves has confirmed significant changes to Individual Savings Account (ISA) regulations. The key change will see the annual tax-free allowance for savers under the age of 65 reduced from £20,000 to £12,000. This new limit is scheduled to take effect from April 2027.
Jeremy Cox, Head of Strategy at Coventry Building Society, highlighted the immediate impact of the speculation preceding the announcement. "Speculation that the cash ISA or tax-free pension limits would be reduced prompted many to act sooner," he said, noting an unusual "rush to save tax-free" in November, ahead of the traditional end-of-tax-year surge.
Urgent Call to Maximise Current Allowances
Cox emphasised that while the change is confirmed, there is still a window of opportunity for savers. "Savers still have time to maximise their allowances, with the full £20,000 cash limit remaining available this tax year and again before it reduces in April 2027," he stated.
However, the warning is particularly pointed for younger savers. Those aged 65 and over will retain the higher £20,000 limit for the time being. Cox further cautioned that the financial pressure is compounded by other fiscal measures. "The further two per cent tax hike on savings interest and frozen income thresholds will drag more people into higher tax bands, where the Personal Savings Allowance is reduced or removed entirely," he explained.
Broader Financial Landscape and Pension Focus
The news has sparked wider commentary from financial experts on saving and investment behaviour. Adrian Murphy, CEO of Murphy Wealth, interpreted the policy shift as a deliberate nudge from the government. "The Chancellor evidently wants people to invest more of their savings and is going to reduce the attractiveness of holding cash, or better incentivise investing in stocks and shares, to make that happen," he said.
Meanwhile, Matthew Blakstad, Deputy Director of Strategic Policy and Research at Pensions UK, used the New Year as a prompt for financial review. He revealed that almost a third of savers indicated they would increase pension contributions if they reviewed their plans. "This demonstrates that the appetite is there and reinforces why Government should revisit Automatic Enrolment contribution levels," Blakstad added.
The consensus from the financial sector is clear: with confirmed changes on the horizon and broader tax pressures mounting, proactive management of savings and pensions has become critically important for UK households.
