Martin Lewis has warned Chancellor Rachel Reeves that any plan to reduce the Cash ISA limit to £10,000 'isn't going to work'. The Money Saving Expert founder addressed speculation that Labour will halve the Cash ISA allowance in the upcoming Autumn Budget, as reported by the Financial Times.
Speaking on his podcast on 16 October, Lewis explained that the government aims to encourage investing by keeping the overall £20,000 ISA limit but allowing only half to be held in cash, pushing people towards Stocks and Shares ISAs and UK stocks. Lewis said he agrees that a lack of investing in the UK is a problem, but he 'disagrees strongly' with cutting the Cash ISA limit as a solution.
Lewis argued that the proposal would upset older savers and fail to encourage younger people to invest. He stated: 'If you cut the Cash ISA limit it will simply pee off millions of older people, I doubt it will change the dial at all on investing, it will just mean they pay more tax on savings.' He also warned it could cause problems for building societies that use savings to lend for mortgages.
Lewis proposed an alternative: a starter investment ISA bonus, giving a 10% bonus on the first £2,000 people invest. He said this would allow people to 'dip their toe in the water' and encourage education about investing. He added that simply cutting the Cash ISA limit would be 'electorally unpopular especially with many older people' and would not achieve the desired effect.
