The future of the £20,000 cap on Cash ISAs is under increasing scrutiny as investment firms push for changes. Richard Oldfield, the boss of Schroders, recently called for a reduction in the £20,000 annual limit for tax-free savings, arguing that the current system is an “anomaly.”
His comments come as the City lobbies Chancellor Rachel Reeves to revise the rules ahead of her upcoming spring statement, with some suggesting the cap could be slashed to just £4,000. While Schroders and other fund managers advocate for more money to be diverted into shares to boost market growth, many savers and industry leaders strongly oppose the idea.
There is concern that cutting the Cash ISA limit could hurt millions of ordinary savers with nearly £300 billion invested in these accounts.
Building societies are particularly vocal in their opposition, with Nottingham Building Society’s CEO Sue Hayes warning that reducing Cash ISAs would result in higher mortgage costs. She said yesterday: “We believe it is important to enable a market where saving is encouraged and incentivised, and alongside other societies, we advocate for the current cash Isa regulations to be maintained.”
Leeds and Skipton Building Societies and Nationwide have also urged the Chancellor to protect the current limits. Dave Doogan, the SNP economy spokesman, echoed the calls today, urging Ms Reeves not to “punish” savers.
Mr Oldfield, however, believes that more risk-taking is needed to stimulate economic growth. He said: “We all accept that we need to grow the UK economy. And to grow the UK economy, we probably need more risk-taking than we have today.”
He argues that keeping the Cash ISA limit the same as that for stocks and shares ISAs is inefficient, adding: “Having the levels equal is a bit of an anomaly.”
He said: “If we take the amount of money that goes into ISAs, that is a huge tax credit that we’re all paying for, and at the moment, a large portion of that is going into cash ISAs. Over any time period, that creates a worse investment outcome for our clients than actually having it in an investment ISA.”
While advocates for reform suggest that a shift to investment ISAs could generate higher returns for savers, opponents argue that many individuals, especially those who view the stock market as too risky, prefer the stability of cash ISAs.
Rachel Reeves will share her spring statement on Wednesday, March 26.
