As the Chancellor prepares to unveil the Autumn Budget, few topics have sparked more debate than the future of the cash ISA. With speculation that the annual allowance could be cut to around £10,000, the discussion has shifted from “how much” people can save tax-free to “what it means” for the millions of ordinary savers who rely on these accounts for financial stability.
Cash ISAs have long been the cornerstone of the UK’s savings culture, simple, safe and trusted. But as policymakers seek ways to drive more money into higher risk investments, the real question is not whether people should invest more, but whether they feel confident to do so.
Behaviour doesn’t bend to policy alone
Encouraging investment is a sound ambition, but changing saver behaviour and appetite for risk is far more complex than adjusting a limit. Official HMRC data shows cash ISA subscriptions surged by 67% in 2023–24 to £69.5 billion, the highest level in over a decade. Two-thirds of all ISA contributions went into cash, not equities.
The reason is not ignorance or laziness; it’s confidence. Most people don’t think of a cash ISA as a “product choice” at all, it’s where they feel safe keeping their hard-earned money. FCA research shows eight in ten ISA holders never switch type, underlining how entrenched that preference is.
Cutting the cash allowance won’t change that. For some savers it may reduce what they save; others may opt simply to place their cash savings outside the tax wrapper. Behavioural change requires understanding, not pressure.
Protecting the right to save safely
If the government’s goal is to build a nation of investors, it must also protect the right to save safely. Real financial resilience is built on awareness and choice.
The hypothesis that a lower cash ISA limit would free up significant capital for investment in equities has been challenged, with the Treasury Select Committee recently concluding that halving the limit would have a “negligible effect”. The real constraint, according to the Committee is not opportunity but capability, people don’t lack money to invest; they lack the knowledge and reassurance to do it confidently.
Therefore, it is quite clear that dramatically reducing the cash ISA limit risks alienating those already unsure about risk, particularly middle-income households trying to build emergency funds or save for home deposits.
If investment is the goal, advice is the missing link
This is where the conversation needs to shift. The UK doesn’t have a “savings problem”, it has an advice and understanding problem.
According to the FCA’s Financial Advice Market Review, more than 39 million adults fall into the advice gap. They want help managing their money but can’t access affordable, jargon-free guidance. For many there is a need for support and education at a more fundamental level. Only once people can understand how to practically balance short term emergency fund building, medium term wealth creation and future pension provision are they in an informed position to make decisions on equity investment risk.
For advisers, this will sound familiar. Clients often know what they want to achieve but not how; how much risk to take, how long to invest, or how to balance liquidity with growth. That lack of knowledge keeps them in cash, not necessarily because it’s optimal, but because it feels safe.
Reducing the cash ISA limit won’t close that ‘advice gap’. If anything, it could deepen it by making savers feel punished for being cautious.
The real solution lies in first delivering accessible, bite-sized, human advice. For example, simple digital entry points that help people model timelines and risk and are transparent with easy-to-understand fee structures and flexible appointments, including evenings and online sessions. We also need to start early and expand financial education for our young people in schools. It is encouraging to hear the Department of Education recently recommending reforms in this area, but not until September 2028.
If the Chancellor truly wants to shift the culture from saving to investing, advice must be treated as critical infrastructure, not an optional extra. The Budget could set a bold precedent by pairing any gradual and progressive ISA reform with measures to expand affordable guidance, perhaps through public-private partnerships or through simplified advice frameworks that make professional help available to the many, not the few.
Cash ISAs also underpin Britain’s mortgage market
It’s easy to forget that cash ISA balances aren’t idle. For building societies, they’re a vital funding stream for mortgage lending. For most people, buying their home is the biggest investment they will make, and cash ISAs fund that ambition.
Reducing incentives for cash deposits could limit lending capacity, particularly for first-time buyers. The Building Societies Association (BSA) analysis suggests that a cut in the annual cash ISA limit from £20,000 to £5,000 could lead to 17,000 fewer mortgage loans and reduce GDP by around £7 billion over five years, undermining the very ecosystem that supports responsible lending.
This is why encouraging investment in British business should not come at the expense of investing in British homes.
Policy that works for real people
Whether or not the ISA limit changes, success shouldn’t be measured by how many savers move into equities. It should be measured by how confident people feel about their financial decisions.
Good advice bridges that confidence gap. It turns uncertainty into action and transforms saving from a habit into a strategy.
The cash ISA debate is, at heart, about trust. If policymakers want people to take more risk, they must first ensure they feel safe doing so. Cutting the limit won’t achieve that, but advice just might.
