Savers are urging the Labour Government to scrap rumoured reforms to ISAs, which could see the accounts hit by a stealth tax raid as part of the upcoming Autumn Budget.
A new survey by smart money app Plum has found that more than two-thirds of cash ISA holders oppose Chancellor Rachel Reeves' proposed reforms to reduce the annual allowance from £20,000.
The research, which polled 2,000 UK respondents who have opened cash ISAs, revealed that 68 per cent believe the current £20,000 yearly cap should remain unchanged.
Findings highlight significant resistance amongst savers to potential Government plans that could limit their tax-free savings options. The survey results suggest that existing cash ISA users value the current allowance structure and are reluctant to see their savings opportunities curtailed.
Savers are urging the Chancellor to avoid slashing the tax-free allowance attached to ISAs
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The most popular alternative would be a non-ISA savings account, chosen by 37 per cent of respondents, followed by a current account at 20 per cent .Investment options proved less appealing to these savers.
When considering stock market investments, UK stocks and shares attracted 18 per cent of respondents, whilst foreign stocks and shares garnered support from just 12 per cent.
Plum customers have shared their personal perspectives on the proposed ISA reforms and their potential financial impact. Tom Robertson, a 26-year-old Investment Analyst from Cardiff, currently holds £5,800 in a cash ISA whilst allocating 90 per cent of his savings to a Stocks & Shares ISA.
"I currently have £5,800 in a cash ISA. Whilst I'm not saving for anything specific, I plan to use these funds for something big," Robertson said.
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Savers are looking for the best ways to make their money go further GETTYJordan Leith, 27, a public affairs manager from London, added: "I currently have £10,500 in a cash ISA, just for rainy days and backup money. I think reforming or phasing out Cash ISAs could be a step in the wrong direction for many savers.
"ISA accounts offer a safe, tax-free way for people to grow their money without taking on investment risk—something especially important for those nearing retirement or with lower risk tolerance. Removing or limiting them would unfairly penalise cautious savers and could push individuals into riskier financial products they may not fully understand or feel comfortable with.
Victor Trokoudes, Plum's founder, said: "These reported reforms would be all stick and no carrot. Our research found that if the cash ISA allowance is to be reduced, the most popular alternative option is to hold this money in a cash savings account, followed by a current account rather than investing.
"Given the effects of fiscal drag from frozen tax thresholds, more people would then be at risk of paying tax on their savings as they exceed their respective allowances. It would be harsh to punish people for saving in these circumstances
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The CEO questioned whether the reforms would achieve their goal of boosting UK business investment. "There is no guarantee that they would put their money into British companies, as Rachel Reeves is hoping," he said, noting that Plum's ISA customers often favour US investments and global tech funds dominated by American companies.
Trokoudes emphasised the risks of forcing cautious savers into unsuitable financial products, particularly given varying levels of financial confidence and knowledge. "It is unfair to drive responsible savers into riskier choices in this way, especially when there is no guarantee it will support investment in UK businesses," he said.
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ISAs are useful tools for those looking save and avoid paying taxGETTYThe CEO highlighted that many cash ISA savers "simply do not want to take on the risks of investing, be that due to their low financial confidence or a hesitance due to lack of knowledge." He argued that addressing these barriers should be the priority before implementing reforms.
He called for careful consideration rather than hasty decision-making. "Ultimately, this shouldn't be a snap decision but a carefully considered one, informed by a broad range of views and expertise," he said, stressing that "savers' interests need to be at the heart of any decisions."
Trokoudes proposed alternative approaches that would encourage investment without penalising risk-averse savers. "Rather than reducing the Cash ISA allowance, we'd like to see a boost to stocks & shares ISAs, perhaps by raising the £20,000 allowance, to encourage more people to invest without penalising people who prefer to take on less risk," he suggested.
He also recommended that the government could pursue pension reforms to support UK investment, describing the market potential as "huge." The CEO emphasised the importance of maintaining choice for savers in how they manage their finances.
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