Chancellor Rachel Reeves is facing criticism over potential further changes to Individual Savings Accounts (ISAs), with a leading expert warning the proposals could "make things worse" for British savers and investors.
What Are the Proposed ISA Changes?
This warning follows the Chancellor's major announcement in the Autumn Budget last year, which confirmed a significant reduction to the annual tax-free savings allowance. From April 2027, the overall ISA limit will be cut from £20,000 to £12,000 for most people.
During the budget, Ms Reeves stated that the remaining £8,000 of allowance would be specifically ring-fenced for Stocks and Shares ISAs. The government's stated aim is to encourage more people to invest their money, rather than leaving it in cash savings, to help build long-term wealth.
Expert Warns of 'Confusion' for Novice Investors
Justin White, chief operating officer at investment app Kaldi, has raised serious concerns that additional tweaks to the system risk creating significant confusion. He argues that while incentivising investment is crucial, complexity is a major barrier.
"People need to be incentivised or given a catalyst to invest, which this proposal addresses," Mr White explained. "But introducing complexity and reducing flexibility around movements from stocks and shares ISAs to cash ISAs... increases confusion for novice investors rather than empowering them."
He fears the rules, designed to prevent the 'parking' of cash in investment accounts, could have the opposite effect. "This proposal, in order to prevent parking of cash, risks defeating its larger purpose of encouraging investment, particularly early investment which is so vital," he added.
His conclusion is clear: for the UK to close its investment gap, policies must provide education, clarity, flexibility and confidence alongside financial incentives, not undermine them.
Pensioners Protected from Cuts
Amid the changes, one group will be shielded from the reduction. The Treasury has confirmed that pensioners aged 65 and over will not see their allowance cut.
As explained by Money Saving Expert, the £20,000 cash ISA contribution limit will continue to apply for those aged 65 or older. For anyone aged 64 or under, the new £12,000 limit will apply only to contributions made from April 2027 onwards, with existing savings unaffected.
The coming years will be critical for savers to understand the new landscape, as the government finalises its plans to reshape the UK's tax-free savings environment.
