British households have been bolstering their cash ISA holdings as a precaution against economic uncertainty, with balances reaching £207 billion by the end of September 2025. This represents a significant 14% increase compared to the same period a year earlier, according to the latest data from UK Finance, the banking and finance industry trade body.
Precautionary Savings Amid Economic Uncertainty
The figures, released as part of UK Finance's Household Finance Review for the third quarter of 2025, reveal a continued trend of robust savings growth. Eric Leenders, managing director of personal finance at UK Finance, stated that while "savings growth has moderated, it remains strong by historic standards." He attributed this to households "continuing to build precautionary buffers against an uncertain economic backdrop."
In addition to the substantial cash ISA holdings, the report noted that a further £295 billion was held in notice savings accounts, marking a 10% annual rise. UK Finance indicated that household savings are likely to see continued growth through the remainder of the year, although a further decline in savings rates or wage growth could temper this expansion.
Budget Announcement: Cash ISA Limit Reduced
This savings behaviour comes against the backdrop of a major policy change announced by the Government in the Autumn Budget. After months of speculation, the Chancellor confirmed that the annual adult cash ISA subscription limit will be reduced from £20,000 to £12,000, effective from April 2027.
However, the overall annual contribution limit for adult ISAs will remain at £20,000. This structure is designed to potentially encourage savers who reach the new £12,000 cash ISA ceiling to consider investing the remainder of their allowance in stocks and shares ISAs. An important exemption to the new rule is that savers aged 65 and over will retain the full £20,000 annual cash ISA allowance.
New Rules to Prevent Loopholes
The Government is also introducing new regulations to prevent people from circumventing the lower cash ISA limit. These measures are expected to include:
- Charges on interest paid on cash held within stocks and shares ISAs.
- Tests to determine whether money is being held in "cash-like" accounts that might otherwise be used to bypass the new cap.
The combination of strong household savings growth and this forthcoming policy shift marks a significant moment for personal finance in the UK. Savers are being advised to review their long-term strategies ahead of the 2027 change.
