Reeves has been holding talks with investment fund managers, who say that pressing people to invest into a Stocks and Shares ISA instead could boost the struggling UK economy.
More than 18 million Britons have a Cash ISA. They’ve tucked away almost £300billion.
Now it’s been reported that she’s discussed cutting the annual Cash ISA allowance to as low as £4,000.
That would be a devastating blow to many. It would slash the amount they can tuck away safely by a staggering 80%.
The only way savers could use more of their ISA tax breaks would be to invest in equities instead, which is riskier.
As the moment, we don’t know what Reeves will do. She probably doesn’t know herself yet.
Everything is up in the air and will remain so until she delivers her Spring Statement on March 26. Unless there are further leaks or hints.
If Reeves does attack ISA tax benefits, it won’t be her first assault.
Today’s £20,000 limit was set in April 2017. In her autumn Budget, Reeves said she would freeze it at that level until 2030.
Inflation will reduce its value in real terms every year as a result.
As she prepares her Spring Statement, Reeves is considering a host of methods to raise tax and cut spending. The Cash ISA question is just one of many.
When asked about the proposal on Thursday, Reeves 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.”
Ominously, 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”.
Earlier this month Emma Reynolds, economic secretary to the Treasury, Emma Reynolds, said Labour wanted to drive an investment culture “that realises cash is not a good investment”, adding: “Why do we have hundreds of billions of pounds in Cash ISAs?”
That’s also ominous, in my view.
A Treasury spokesperson has said only that “we keep all aspects of savings policy under review”, which is deliberately, infuriatingly vague.
Chancellors often float ideas before a Budget, to see how they play with the general public.
Some happen, some don’t.
But one thing is certain. Express readers love their Cash ISAs. So it’s important we get the message out to Reeves.
Whilst Stocks and Shares ISAs should deliver superior returns in the longer run, in the short term they are volatile.
This puts many readers off, including Cash ISA saver Warwickmaiden, who commented beneath one of my articles: “I would never put my money into stocks and Shares because I don’t know anything about them, how they work and I don’t risk my money! Others won’t either.”
Reader watchdog52 said Reeves “should leave well alone” as many older people rely on the security of Cash ISAs to help fund their retirement. “Where’s the incentive for anyone to save for a better future if Labour keeps interfering with proven schemes?”
Many pointed out that banks and building societies rely on their customers’ Cash ISA savings to fund mortgage lending.
Reader chris_p_crunchy said if Reeves did cut back on the Cash ISA this would undermine Labour’s plan to build 1.5million homes by making less money available for mortgages. “Surely she’s not that naive? Oh I forgot it’s Rachel Reeves!
Reader revv simply stated. “In the 1970s, at a similar time in the economic cycle, the FTSE index fell by 73%. You are quite right to be concerned about investing in shares.”
Will Reeves listen? We’ll find out in just over a month. In the meantime, use as much of this year’s Cash ISA allowance as you can, in case next year’s is lower.
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