Rachel Reeves ISA change warning as savers ‘run out of money'
The rumored reform could push account holders out of saving altogether, an expert said.
Rachel Reeves has been dealt a fresh blow as experts warn that her reported ISA plan could remove a vital tool for young people to rely on, and older savers could be pushed out of saving altogether. Global student housing brand Yugo said that most university-age Gen Zs will "already be out of money" by July 9, leaving 84 days to survive without financial support. "For this group, cash ISAs aren't just about wealth building, they can act as a tax-free safety net to help cover essentials like rent, food, and transport when income dries up over the holidays," the firm said.
"Cutting the allowance removes one of the few low-risk tools young people rely on to get through the summer squeeze." The Chancellor is expected to slash the tax-free limit of a cash ISA from £20,000 to £10,000 to try and ensure more money is funnelled into stocks and shares. Account holder can currently deposit £20,000 a year tax-free in ISAs, and there is no separate cap on the cash portion, which means the full £20,000 can be held in cash if preferred.
However, Ms Reeves is believed to be plotting to force any tax-free savings above £10,000 into stocks and shares rather than cash.
Harriet Guevara, chief savings officer at Nottingham Building Society, warned the move would push savers into using products they are unfamiliar with.
She said: “While we understand the Government’s desire to modernise the ISA system and channel investment into UK markets, it’s vital that reforms don’t come at the expense of everyday savers.
"Cash ISAs remain a core savings tool for millions, offering a more secure, accessible and tax-free way to build financial resilience over time, compared to other financial products.
"There’s growing speculation that the annual Cash ISA allowance could be restricted as part of wider reforms by the Government. If that happens, it risks pushing savers into products they may not fully understand, or worse, out of saving altogether."
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Ms Guevara added that many of Nottingham Building Society's members value the certainty that cash ISAs provide, which is particularly the case in a period of such ongoing economic uncertainty.
"Our view is simple - savers deserve choice, not restriction," she said.
"Now is a good time to take advantage of the full £20,000 allowance while the current rules still apply, particularly with rates on both easy access and fixed cash ISAs still relatively strong.
"The Government’s review of the system is an opportunity to re-centre it around savers’ needs. Optionality, simplicity and flexibility are key to helping people build financial confidence over the long term.”
