The Money Saving Expert took to social media to criticise the proposed savings changes
Money Saving Expert Martin Lewis has criticised reports that Rachel Reeves is planning to announce a reduction in Cash ISA limits, labelling it as “piss people off economics”.
In a post on X after the reports surfaced, the personal finance expert said: “Reports Rachel Reeves will announce a cut to the cash ISA limit at her July 15 Mansion House speech. If true, I think it’s a mistake.
“I doubt it’ll substantially nudge people to invest not save; said to be the aim. This isn’t nudge economics, its piss people off economics.
“Currently, you can put £20,000 in tax-free ISAs, whether cash (savings) ISAs, shares (investments) ISAs or the smaller types. Its said the reduction’d only be for cash ISAs, so people can still invest the same tax free.
“NB At this point I should note, it is v likely to only impact future ISA limits (though whether the cut would start this tax year is a big question) so those with money already in cash ISAs shouldn’t panic.”
He went on to say: “My suspicion is that for many who use cash ISAs, it will just result in many having to pay more tax on their relatively paltry savings interest, not have an epiphany and think ‘oooh i’ll just fill up the remainder of my ISA allowance with investments instead’.
“Now I should note, I am in favour of encouraging people to invest in the UK. It’s good for individuals over the longer term and for the economy, especially if a way is found to encourage people to invest in UK firms. Yet this isn’t the route to do that.
“I’ll be disappointed if the Chancellor chose to listen to the big investment firms in the City, and shut down many building societies and consumer groups who’ve said its not a good route.
“Instead lets start a conversation about how we encourage investments – even possible intervention when people save to explain other options.
“We need to educate, provide better 1-on-1 easy guidance, and start to change the way people think about risk. But lets use the carrot not a stick.”
This comes as the Chancellor is poised to reduce the £20,000 tax-free cap, though she previously said she would not slash the amount that can be paid into ISAs, reports The Express.
A Whitehall source told the Financial Times that negotiations are still ongoing regarding the new cap. It would represent the biggest ISA overhaul since they came into force in 1999 under Gordon Brown.
Ms Reeves reportedly believes that the plan will spur investment in British companies and boost the stock market by encouraging people to put their money in shares.
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