Housing targets could be derailed if cash Isa limit is cut – building society

Andrew Prosser, head of investments at InvestEngine, said: “With suggestions the Government could slash the cash ISA limit to £10,000, it’s worth asking whether such a move would actually achieve its goal of encouraging more people to invest.

“Over 20 million people have an ISA, but with only around 15 per cent of the population investing through them, it’s clear more needs to be done to turn the UK into a nation of investors and cutting the cash ISA limit alone is unlikely to change that.

“The groups most likely to use cash ISAs – those aged 25–34 and over 65 – typically rely on them for very different reasons.

“Younger savers often use cash to build deposits for things like a first home, while older savers use them to manage short-term spending needs.

“Neither group is likely to want exposure to market risk, so reducing the cash limit wouldn’t suddenly push them toward investing their money.

“Instead, many would simply hold the same amount of cash outside the ISA wrapper, meaning more of their interest could be taxed.

“The result could be that UK savers end up worse off, not more invested.

“If the Government genuinely wants to boost investment participation, it should focus on making investing simpler and more accessible, while encouraging better financial education instead of penalising those who prefer to keep their money in cash.”