Cash ISA limits will be cut to £12,000 from the current £20,000 as of April 2027, but over-65s and state pensioners will be exempt from the reduction, retaining the full £20,000 annual allowance, under plans confirmed by the new Labour government led by Andy Burnham.
Changes to Cash ISA Rules
Former Chancellor Rachel Reeves had announced the overhaul in her Autumn Budget, and the policy is expected to proceed as planned with the backing of Burnham's Chancellor John Healey. The change means that from April 2027, savers will only be able to deposit up to £12,000 in a Cash ISA each year, down from £20,000. However, those aged 65 and over, including all state pensioners, will keep the existing £20,000 limit.
Currently, the state pension age is 66, rising to 67, meaning all state pensioners will qualify for the higher allowance, as will those aged 65 and over who have not yet reached state pension age.
Impact on Savers
The full £20,000 tax-free ISA allowance will remain in place overall, but savers who want to use the entire amount will need to put £8,000 into a Stocks and Shares ISA instead of a Cash ISA. The change only affects new deposits; existing Cash ISA balances will not be impacted.
According to Reeves' speech, the move is designed to encourage more investment in UK markets. She said: "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."
Online Investment Hubs
To support the shift, online hubs will be launched to help people invest in the UK. Reeves stated: "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 decision to cut Cash ISA limits had been anticipated and sparked debate, with financial campaigners like Martin Lewis expressing concerns. However, the exemption for older savers provides some relief for pensioners and those nearing retirement.
