Savers left 'frustrated' as Rachel Reeves's cash ISA reforms could 'force' them into stock market investing

Although experts understand that Cash ISAs will remain untouched in tomorrow's speech, speculation about future cuts to the annual £20,000 allowance has already sparked fierce resistance from savers who view such changes as an attempt to push them towards riskier investments.

New research from Moneybox has revealed the depth of public opposition to any reduction in the Cash ISA allowance, with findings showing that nearly six in ten Cash ISA holders have no trust in the Government to protect savers' interests when designing ISA policy.

The survey of found that 92 per cent believe no changes should be made to long-standing savings products without first consulting those who use them.

The research reveals that 62 per cent of Cash ISA holders would be angry if the allowance was cut, viewing it as unfair to cautious savers. More than half (53 per cent) believe reducing the allowance would further erode trust in government decision-making.

Rose, a People Ops & Marketing Manager in the 35-44 age bracket, said: "I think it's unfair to force people into putting money into stocks and shares just to benefit the stock market. Help working people grow their money in safe, manageable ways and on their own terms."

Reeves is expected to use tomorrow’s speech to encourage savers to move their money into stocks and shares to beat low interest rates, after backing away from controversial plans to cut the £20,000 tax-free cash ISA allowance in favour of promoting investment ISAs.

The proposed cut had support from some City figures, who argued it would channel more money into UK businesses

But the plans faced strong criticism from building societies and savings experts, who warned they could discourage saving and undermine efforts to support homeownership.

Although Reeves still supports the idea of reforming cash ISAs, the Treasury has acknowledged that the policy is not yet ready to be introduced.

Instead, the focus tomorrow will be on what it describes as the "first step", offering better information to help people understand how and where to invest.

The MoneyBox findings show that 40 per cent of respondents believe there is no justifiable reason to reduce the allowance at this time.

The research challenges assumptions that Cash ISAs primarily benefit wealthy individuals, revealing that 64 per cent of respondents are full-time employees earning less than £50,000 annually. Fewer than five per cent earn £100,000 or more.

These savers are using the product for essential financial goals, with 28 per cent saving to buy a home, 24 per cent building emergency funds, and 24 per cent maximising interest on their savings.

Lisa, an Environmental Health Officer in the 35-44 age bracket said: "I'm frustrated as I have only just reached the position of being able to start saving!

"The money I am now saving is to fund higher education costs for my children when they go to Uni and to hopefully help with a house move in the future to a larger family sized home. Please leave the limit alone!"

The findings underscore how the £20,000 allowance serves modest earners building financial resilience rather than operating as a tax shelter for the wealthy.

Evidence suggests that cutting the Cash ISA allowance would fail to achieve the Government's goal of encouraging stock market investment.

Half of respondents said they would not feel confident investing any surplus savings in the stock market. Instead, 44 per cent would move surplus savings to regular savings or current accounts.

Fewer than one in ten Cash ISA savers who don't already hold a Stocks & Shares ISA would open one if the allowance was cut.

Brian Byrnes, Head of Personal Finance at Moneybox, commented: "Cash ISAs are not, and never have been, a blocker to investing—they're a gateway. Our research shows that while there is an appetite to invest amongst most savers, people are held back by fear of financial loss, lack of confidence and limited knowledge."

He added that the government should focus on "inclusive, considered reforms that support savers on their journey from saving to investing" rather than cutting allowances.