Chancellor Rachel Reeves just dropped a bomb on Britain’s favourite savings product. Starting April 2027, your cash ISA allowance is getting chopped from £20,000 to £12,000. The goal? Push you out of cash and into investments. But here’s the twist: if you’re over 65, you’re off the hook. The Treasury reckons pensioners need bigger cash cushions, whilst younger savers should be taking more risk. Building societies are furious, brokers are celebrating, and millions of savers are wondering what this means for their money.
What’s Actually Changing with Cash ISA Limits?
The cash ISA ceiling is dropping by 40% in less than two years. It’s the first major shake-up since Philip Hammond bumped it from £15,000 to £20,000 back in 2017.
Reeves initially floated a £10,000 cap, but settled on £12,000 after pushback from the pro-cash lobby. Still, it’s a massive cut for anyone under 65 who’s been maxing out their allowance.
The over-65 exemption is new territory for ISAs. Helen Morrissey from Hargreaves Lansdown called it “smart” but warned it adds complexity to a product that’s supposed to be simple. Retirees can now gradually shift from stocks and shares ISAs into cash without hitting a brick wall.
Why the Government Wants You Out of Cash
This isn’t about being mean to savers. It’s about getting Britain’s £360bn in cash ISAs working harder for the economy.
The Treasury’s logic goes like this: cash just sits there earning interest. Investments fund businesses, create jobs, and drive growth. Right now, too many Brits are parking money in cash ISAs when they could handle more risk.
Reeves wants to create a “nation of investors.” That means nudging younger savers towards stocks and shares ISAs, even if it means limiting their cash options. It’s carrot and stick—except the stick arrived first.
Building Societies vs Brokers: The ISA Wars
This policy has sparked a proper turf war in financial services.
Building societies are livid. They use cash ISA deposits to fund mortgages, so cutting inflows could push up borrowing costs. Harriet Guevara from Nottingham Building Society called it a “sucker punch for savers” that undermines the government’s pledge to grow the mutuals sector.
Brokers and investment platforms? They’re popping champagne. Richard Stone from the Association of Investment Companies hailed it as “a milestone toward creating a nation of investors.” Some even wanted Reeves to abolish cash ISA limits entirely.
It’s a classic clash: lenders who need stable deposits vs investment firms who want more assets under management.
What Happened to the British ISA?
Remember the Brit ISA? Jeremy Hunt proposed it in spring 2024—a special allowance requiring 20% in UK equities to boost domestic investment.
It’s dead. Labour shelved it, briefly revived it, then killed it for good after ISA providers and the Investment Association gave it the thumbs down.
Instead, the Treasury’s backing an industry-led campaign to promote investing before the 2026 ISA season. But that’s already hitting snags—Interactive Investor pulled out over costs, and AJ Bell, Freetrade, and Trading 212 have all walked away.
Turns out building an investment culture is harder than just cutting cash limits.
What This Means for Your Money
If you’re under 65 and currently maxing out your £20,000 cash ISA, you’ve got until April 2027 to adapt. That’s less than 18 months to rethink your strategy.
Consider splitting between cash and investments. Keep your emergency fund in cash (most experts say 3-6 months of expenses), then shift the rest into a stocks and shares ISA if you can stomach the volatility.
If you’re over 65, you’re golden. You can keep piling £20,000 a year into cash ISAs, giving you flexibility as you transition into retirement.
For building societies, this could squeeze their mortgage funding. Whether that pushes up rates remains to be seen, but it’s worth watching if you’re shopping for a home loan.
The Bottom Line
Reeves is betting Britain’s savers can handle being pushed towards riskier assets. The £12,000 cash ISA limit is still generous by historical standards—just not by recent ones.
Whether this creates a nation of investors or just annoys millions of cautious savers? We’ll find out in 2027. One thing’s certain: your savings strategy just got more complicated.
FAQ
Q1: When does the new £12,000 cash ISA limit start?
A: The reduced allowance kicks in from April 2027, giving you about 18 months to adjust your savings strategy. Until then, the current £20,000 limit remains in place.
Q2: Can I still save £20,000 in an ISA if I’m under 65?
A: Yes, but you’ll need to split it. The overall ISA allowance stays at £20,000—you just can’t put more than £12,000 of it into cash ISAs. The rest can go into stocks and shares ISAs or other ISA types.
Q3: Why are over-65s exempt from the cut?
A: The government recognises retirees often need larger cash reserves for lower-risk income. The exemption lets them shift gradually from investments into cash as they age without being penalised.
Q4: Will this make mortgages more expensive?
A: Possibly. Building societies use cash ISA deposits to fund mortgages, so reduced inflows could put upward pressure on rates. How much impact this has remains uncertain.
Q5: What happened to the British ISA?
A: It’s been scrapped after lacklustre support from ISA providers and industry bodies. The government’s now focusing on an education campaign to encourage investing instead.
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Effective Date: 15th July 2025
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