Financial guru Martin Lewis has delivered his verdict on the upcoming shake-up to cash ISAs, stating that a significant change coming in 2027 'isn't as bad as it could've been'. The founder of MoneySavingExpert.com shared his analysis following the latest Budget announcements, focusing on new rules for Individual Savings Accounts.
What Are The New ISA Rules?
Currently, most UK savers can invest up to £20,000 each tax year into one or more ISAs. These tax-free accounts come in several forms, including cash ISAs, stocks and shares ISAs, innovative finance ISAs, and lifetime ISAs.
However, from 6 April 2027, this will change for cash ISAs. The government is set to reduce the cash ISA allowance to just £12,000 per year for anyone under the age of 65. This forms part of a government initiative to encourage younger people to consider investment-based savings options over traditional cash holdings.
Martin Lewis's 'Win' for Older Savers
While Martin Lewis indicated he doesn't fully agree with the government's approach, he revealed a crucial concession he helped secure during discussions with Chancellor Rachel Reeves.
On a special Budget episode of his podcast, Lewis explained his argument to the Chancellor: "The people who have most money in cash ISAs are older people, who you are not encouraging to invest, so that is a perverse policy." He questioned the logic of making older savers pay more tax when the policy was ostensibly aimed at younger generations.
This dialogue led to what Lewis describes as a 'carve out': savers aged 65 and over will not see their cash ISA allowance cut and will retain the full £20,000 limit.
Understanding the Full Picture
It is vital for savers to understand that the overall total ISA allowance remains at £20,000 for all ages. This means that while those under 65 will be limited to saving £12,000 in a cash ISA, they could potentially invest the remaining £8,000 of their allowance into a stocks and shares ISA or another type of ISA.
Lewis did caution that the Budget contained several 'bad' changes for savers alongside this development. Nevertheless, his intervention ensured a more nuanced outcome for the millions of Britons who rely on ISAs for their financial planning.
