Cash Isas: Rachel Reeves pauses plans to reduce amount savers can put in
The chancellor had been expected to announce changes to the accounts in her Mansion House speech next Tuesday, with cuts to the £20,000 savings limit thought to be at the heart of the plans.
Reeves is keen to encourage UK savers to consider stock market investments, where bigger returns are possible but there is also more risk. It had been suggested that the limit on cash Isas could be cut to as little as £5,000.
However, building societies had argued that the money deposited by savers was vital to fund mortgages, and that slashing the limit would reduce the number of homebuyers they could help.
Reeves has not dropped plans over cash Isas entirely, but ministers want more time to consult the industry, said the Financial Times , which first reported the news.
UK savers can invest up to £20,000 each tax year in Isas, and can spread the money across cash versions, which are savings accounts that offer interest, or stocks and shares versions, which offer growth and income. Returns on them are tax-free.
Tax-free Isas were introduced in 1999. More than 18 million people have a cash Isa, and an estimated £300bn sits in their accounts.
Matthew Carter, the head of savings and mortgages at Coventry building society, said: 'Millions of savers will be able to breathe a sigh of relief if the chancellor has decided to change course on cash Isas.'
Carter said cutting the limit would be 'all stick and no carrot'.
He added: 'The ambition to encourage more investment in UK equities is a good one. But taking extra risk with the hope of greater longer-term reward isn't always the appropriate choice. Many people, especially those already in retirement or saving for a house deposit, don't need or want the uncertainty of the stock market.'
The chancellor is expected to use Tuesday's speech to promise more advice and support for consumers to encourage them to invest in stocks and shares.
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In the UK many consumers choose cash over more risky investments – figures from the investment firm Aberdeen show they typically hold an average of 15% of their assets in cash and 8% in stocks. That compares with 13% for each among French consumers, and with 10% and 33% respectively in the US.
The chancellor's speech will come at a time when the Treasury faces difficult decisions about how to balance the public finances. On Friday the latest monthly GDP figures showed that the UK economy contracted in May, falling by 0.1%.
The Treasury has been approached for comment.
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