Martin Lewis issues Cash ISA warning as limit cut to £4,000 on table

Money expert Martin Lewis has issued a warning over a reported cut to Cash ISA limits Chancellor Rachel Reeves is believed to be considering announcing in just two weeks’ time.

Speaking on ITV's This Morning, the MSE founder warned Ms Reeves that the plans to slash Cash ISA limits from their current £20,000 annual cap to as low as £4,000 are a ‘big mistake’ which he said would not benefit ‘normal savers’.

Although the government has previously stressed it will keep the £20,000 tax-free savings ISA limit in place, it is thought that the Chancellor will reduce the Cash ISA limit but keep the Stocks and Shares limit at £20,000, forcing people to invest at least some of their savings in the Stocks and Shares ISAs to get the same tax-free perks as before.

Martin Lewis said: “It’s been flagged for quite a long time that she [Chancellor Rachel Reeves] has been looking at this. I was giving evidence to a Treasury Committee on LISAs [Lifetime ISAs] and this came up and I was asked my views on it at the time.

“And I said I thought it was a mistake. I still think it’s a mistake.”

Martin added: “Here’s what is thought to be happening at the Mansion House Speech on July 15.

“The Chancellor will announce, currently you can put up to £20,000 per tax year into an ISA, whether it’s a Cash ISA, or an investment ISA, or a combination of both.

“What the suggestion is, is that the Chancellor is going to lower the amount you can put into a Cash ISA which is a savings ISA but keep the amount you can put into an investment ISA at £20,000.

“It’s been discussed she might lower this to as low as £4,000 per tax year.

“When investment is £20,000, the concept is, the idea is to nudge people into investing in the stock markets and take a risk, which, in the long run, should outperform savings, rather than to save.

“Personally I think it’s a big mistake. It might be thought of as nudge economics, I think it’s p*** people off economics instead.

“I think most normal savers are gonna go 'oh, I don’t get the tax-free savings any more I’ll shove it all into investments'.

“It’s like comparing apples with ducks, they’re different things for different people. We do need more people to invest in the UK.

“We are too risk averse on investments. We do want people to invest in UK companies, that helps the individual and the economy. But you do it by education and encouragement, and by working so people understand investment and better guidance and free guidance that’s available to help people do it.”

Martin added that “there’s a huge amount of anger” at the idea, suggesting it could be on a similar scale to the fury directed at the Government over their winter fuel cuts that led to a huge U-turn.

He continued: “I’ve personally told Rachel Reeves I think this is a mistake, and I’ve spoken to people at the Treasury, I know many of the building societies out there and some of the big stocks and shares firms are saying, this is not the right way to encourage people to invest.”