# Cash Isas: pressure grows against rumoured move to £4,000 allowance

## Research shows strong support for keeping tax-free accounts in their current form with £20,000 annual limit

Research shows strong support for keeping tax-free accounts in their current form with £20,000 annual limit.

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A campaign to “save” cash  gathered pace this week, with research published showing strong support for the savings accounts.

However, data was also issued that investment firms said showed UK savers were “paying the price” for playing it safe because putting money into the stock market can generate much higher returns.

## A campaign to “save” cash Isas gathered pace this week, with research published showing strong support for the savings accounts.

However, data was also issued that investment firms said showed UK savers were “paying the price” for playing it safe because putting money into the stock market can generate much higher returns.

## Instead, the suggestion from some providers is that it could merely intensify British investors’ love affair with big US tech companies and lead to even more UK cash being ploughed into the shares of companies such as Apple, Amazon, Meta (owner of Facebook), Microsoft and Tesla.

The government is being lobbied by some fund managers to scale back the tax breaks on cash Isas, which are used by almost 8 million savers each year. Last week it emerged that ministers are considering a proposal to cut the maximum amount that people can put into them .

Organisations such as the Building Societies Association (BSA) are spearheading the campaign to save cash Isas, which has gathered support from others in the industry.

On Wednesday the consumer champion Martin Lewis told a committee of MPs: “I’ve already had people telling me they are worried about what’s going on, so they are going to withdraw from cash Isas, which is clearly not the right thing to do.” He added: “I don’t think we should reduce the cash Isa limit.”

The government has not ruled out cutting the limit and, when asked about the proposal, Reeves appeared to lean into this thinking when she said: “At the moment there is a £20,000 limit on what you can put into either cash or equities, but we want to get that balance right.” She added that she wanted to create “more of a culture in the UK of retail investing like you have in the US, to earn better returns for savers and support the ambition to grow the economy”.

The two main types of Isa are the cash Isa and the stocks and shares Isa. Consumers can spread their money across different types of Isa or pay into only one. At the moment savers can, if they wish, stash up to £20,000 a year in one or more cash Isas.

This allowance is a lot more generous than it used to be: for almost a decade the cash Isa limit was £3,000 a year.

Some investment firms want the government to put more emphasis on investing in the stock market, which would align with its mission to boost economic growth and could deliver higher returns to individuals over the long term.

But the big savings providers have pledged to fight any attempts to rein in cash Isas. This week, the BSA  showing that 73% of UK adults with cash Isas are opposed to the government scrapping the accounts or reducing what you can pay in; some people might be surprised that the figure wasn’t even higher.

Meanwhile, two-thirds (67%) of cash Isa savers said they knew about stocks and shares Isas, and a further 30% had heard of them, but 90% said it was important to them that they get back at least the amount they had saved or invested – a guarantee that can only be provided with cash savings.

Robin Fieth, the BSA chief executive, says that “it’s clear many people are making a conscious decision to save in cash rather than stocks and shares”. He adds: “We will continue to press the chancellor to listen to all sides of the cash Isa argument, not just to the loud voices of a group of self-interested big businesses.”

However, the investment platform AJ Bell says a glance at the long-term performance of different markets “shows that cash is definitely not king”.

It published figures showing that £1,000 saved in a cash Isa in April 1999, when the accounts were launched, and earning the average cash Isa rate over that almost 26-year period, would have turned into £2,016, assuming no further contributions. That’s only a little bit better than inflation.

But if that same £1,000 had been invested in global equity funds, it would have on average grown to £4,641. And if you had put it into a fund specialising in North American companies, you would typically be looking at £5,964.

Laura Suter, at AJ Bell, says: “When it comes to choosing between a cash Isa and a stocks and shares Isa, the key question is: are you saving for the short term or the long term? If you’re setting money aside for an emergency fund, typically three to six months’ worth of expenses, then a cash Isa is a solid option … But if you’re looking at medium-to-long-term goals, such as saving for retirement alongside a pension, for a house deposit, home improvements in future or a career break, then a stocks and shares Isa could be a more effective route.”
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