Over-65s will keep the full £20,000 Cash ISA allowance while younger savers face a reduced limit, under rules confirmed for April 2027. The changes were announced by former Chancellor Rachel Reeves and will be implemented by the new government led by Prime Minister Andy Burnham and Chancellor John Healey.
Under the reforms, the overall ISA allowance remains at £20,000 a year, but only £12,000 of that can be held in a Cash ISA. The remaining £8,000 must be invested in a Stocks and Shares ISA if savers want to use the full allowance.
Over-65s exemption
Over-65s and all state pensioners will be exempt from the cash limit reduction and can continue paying up to £20,000 a year into Cash ISAs. Since the state pension age is now 66 and rising to 67, every state pensioner qualifies for the exemption, as do people aged 65 and over who have not yet reached state pension age.
Announcing the changes, Rachel Reeves told MPs: “From April 2027, I will reform our Isa system, keeping the full £20,000 allowance while designating £8,000 of it exclusively for investment, with over-65s retaining the full cash allowance.”
Reaction to the ISA cut
The ISA overhaul followed months of speculation over drastic cuts to cash deposit limits, with some rumours suggesting the allowance could fall as low as £10,000. Financial campaigner Martin Lewis, founder of Money Saving Expert, had opposed the cut but welcomed the exemption for older savers, which he had been pushing for.
The changes will not affect existing deposits, but savers who regularly put more than £12,000 a year into Cash ISAs will need to consider alternatives before April 2027.
Online investment hubs
As part of the reforms, new online hubs are being set up “to help people invest” in the UK. Rachel Reeves said: “And thanks to our changes to financial advice and guidance, banks will be able to guide savers to better choices for their hard-earned money. Over 50% of the Isa market – including Hargreaves Lansdown, HSBC, Lloyds, Vanguard and Barclays – have signed up to launch new online hubs to help people invest here in Britain.”
The new ISA rules take effect from April 2027. Prime Minister Andy Burnham has also committed to keeping the state pension triple lock and will continue with Reeves’ Income Tax exemption for state pensioners.
