The Treasury is understood to be pushing ahead with controversial reforms to cash ISAs despite concerns over market volatility.
Said changes aim to redirect savings from cash ISAs toward equity investments such as stocks and shares ISAs, The i Paper reports.
Chancellor Rachel Reeves had been expected to announce these reforms during the upcoming Spring Statement on March 26.
However, the plans will now likely be revealed later in the year, with the full package expected in the Autumn Budget for 2025. Government insiders insist this does not represent a delay to the reforms.
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The proposed reforms could see the current £20,000 annual cash ISA allowance significantly reduced. Some City firms have advocated cutting the limit to as low as £4,000 to encourage savers to invest in equities instead.
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Rachel Reeves is preparing significant reform to ISA reform
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The Treasury is expected to consider reform options to “get the balance right between cash and equities”.
More than 18 million people currently hold savings in cash ISAs, with approximately £300billion stored in these accounts.
Rachel Reeves has previously stated she wants “to create more of a culture in the UK of retail investing like what you have in the United States”.
The Treasury will collect views from the industry before making final decisions on the ISA changes.
Some details are expected to be confirmed as part of the Financial Services Growth and Competitiveness Strategy.
However, as the reforms may require legislative changes, the full package is unlikely to be laid out before the Autumn Budget.
Rachael Griffin, a tax and financial planning expert at Quilter, suggested this approach fits with Labour’s strategy of consolidating major fiscal decisions into a single annual event.
“Delaying any reforms allows Labour to potentially present a comprehensive package of changes to ISAs rather than making piecemeal adjustments,” she said. Analysts warn that market volatility makes the timing of these reforms questionable.
Professor Alper Kara of Brunel University told The i Paper: “Recent stock market volatility makes this approach counter-intuitive, as investors are more likely to seek safe assets.”
The Treasury may be hesitant to implement changes amid concerns over Donald Trump’s aggressive tariff policies.
Trump has imposed 25 per cent tariffs on imported steel and aluminium, sending shockwaves through international financial markets.
The UK’s FTSE 100 has suffered declines amid fears that trade tensions could dampen economic growth.
The S&P 500 has also experienced fluctuations as businesses prepare for possible retaliatory measures from China and the EU.
Proponents argue that scaling back cash ISAs could boost investment into the UK stock market.
This would support Rachel Reeves’ growth plans by strengthening the City’s equities market.
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Stocks and shares ISAs already hold more funds than cash ISAs, with Government figures showing nearly 60 per cent of ISA value is in shares and 40 per cent in cash.
Harriet Guevara, the chief savings officer at Nottingham Building Society, warned: “We welcome the fact that the Government has heard the concerns of the industry and the public around potential changes to the cash ISA allowance, and that no changes will be announced in the upcoming Spring Statement.
“Cash ISAs are a vital tool that help people plan for key life moments, from buying a home to securing their retirement, and we believe the allowance should stay as is.
“While we support the Government’s broader efforts to stimulate economic growth and drive investment in UK businesses, we remain steadfast in our view that there’s no guarantee that reducing the Cash ISA allowance would actually help – and in fact there’s a real concern that it will simply lead to people saving less.”
