UK Chancellor Reeves Halts Cash ISA Reform Amid Industry Backlash

Chancellor Rachel Reeves has paused plans to reduce the £20,000 tax-free Cash ISA allowance following significant opposition from building societies and other financial institutions, which warned that lowering the limit could harm savers and restrict the availability and affordability of mortgages. Instead of immediate reform, Reeves is expected to focus on providing better investment advice and support to encourage savers to diversify into stocks and shares ISAs without cutting the current cash savings allowance. The government acknowledges differing internal views and aims to continue consulting with industry stakeholders to carefully balance encouraging investment in the UK economy and preserving the crucial role Cash ISAs play in personal savings and lending. Building societies, which use cash ISA deposits to fund mortgage lending, emphasize that reducing the allowance could make mortgages more expensive and less accessible, potentially impacting the government's housing targets. Despite the pause, the Treasury remains committed to exploring ISA reforms to enhance returns for savers and stimulate economic activity but will proceed cautiously with further consultation. The recent surge in new Cash ISA accounts ahead of the anticipated changes highlights public concern and the importance of these savings products to millions of Britons.