The Government has confirmed that pensioners aged 65 and over will retain the full £20,000 annual cash ISA allowance, even as the limit is reduced to £12,000 for younger savers from April 2027. The change, announced by former Chancellor Rachel Reeves and set to be implemented under Andy Burnham and new Chancellor John Healey, specifically protects those with more than £10,000 in savings.
Under the new rules, anyone under the age of 65 will only be able to deposit up to £12,000 per tax year into cash ISAs, down from the current £20,000. However, they can still place up to £8,000 in stocks and shares ISAs, though any interest earned on those accounts will be subject to a 22% charge.
Protection for Over-65s
Crucially, the reduction does not apply to individuals aged 65 or over. They will continue to enjoy the existing £20,000 tax-free allowance, meaning no changes for pensioners with savings exceeding £10,000. They can keep their cash in ISAs and benefit from tax-free interest without any disruption.
The decision follows the Autumn Budget, which outlined the intention to lower the cash ISA limit for under-65s specifically. The Government has now confirmed that the £20,000 entitlement will apply from the tax year in which you turn 65, ensuring a clear transition for savers approaching retirement.
Encouraging Investment
The policy aims to encourage working-age savers to invest more in stocks and shares rather than holding cash. Martin Lewis' Money Saving Expert explained: "From April 2027, under-65s will only be allowed to have a maximum of £12,000 of the £20,000 annual limit in cash ISA savings, though they will be able to put the rest in shares ISAs if they choose."
This is part of a broader Government push to steer younger people towards higher-return investments, despite the new 22% charge on interest from stocks and shares accounts. The move is expected to affect millions of savers under 65, while providing certainty for pensioners who rely on the higher allowance.
