Martin Lewis gives £10,000 cash ISA alert adding ‘my problem is this’ | Personal Finance | Finance
Martin Lewis gave Good Morning Britain viewers a rundown of the potential plans on one of the UK’s most popular ways to save money that Chancellor Rachel Reeves is rumoured to be about to change. Cash ISAs are used by 18 million people in the UK – but the amount people can put in each year might change.
The comments follow speculation that plans to cut the annual tax-free cash Isa allowance could be announced in Chancellor Rachel Reeves’s Mansion House speech on July 15.
The Government is looking at options for reforms to Isas to get what it feels is the right balance between cash and equities, to help savers earn better returns, boost the culture of retail investment, and support the push for growth.
The Financial Conduct Authority (FCA) has previously said there are around seven million adults in the UK with £10,000 or more in cash savings who may be missing out on the benefits of investing throughout their lives.
Host Susanna Reid asked Martin on today’s show: “The Chancellor is reportedly set to hit save as hard as she prepares to announce a review of the 20,000 pounds cash ISA limit as part of her Mansion House speech next week. Now, more than 18 million people in the UK save in cash ISAs, so. Is she likely to reduce the limit you can save? Talk us through the proposals.“
Martin, a personal finance expert who founded the Money Saving Expert site said that currently people can put £20,000 in a year. He added: “The overall limit, she has said will stay at £20,000, but the strongly suspected rumour is that means she’s going to drop the amount that you can put into cash ISAs, into savings.
“The reason for doing this, we’re being told is not to raise tax revenue, they’re very strong on that, is to try and encourage more young people to invest for their future, which is actually a good thing that they should be doing. “
Mr Lewis said his objection was a government telling people what to do with their own money: “My problem is, I think this is a form of push economics, nudge economics, but actually in reality it’s just pee people off economics, because most people who’ve got money in savings aren’t going to go ‘I’m going to have to start paying tax on some of the interest, I’m going to shove it into a risky-based investment.’”
He said a better alternative in his view was helping people to chose investment simply by providing guidance and education. He said a poll he conducted showed people were against the limit being cut and added: “Politically, this is likely to be another very unpopular move. Now the talk was the limit could be cut as low as £4,000, and therefore you would have £16,000 you would put into a stocks and shares ISA.
“I can tell you now it will not be £4,000 pounds. I am hearing rumours, that’s the only way I’m going to phrase it, that I suspect if it drops, it’ll be down to £10,000, maybe £15,000. type of limit that they’re going to, so that which would be disappointing but not disastrous if you ask me.
“You know, I, if, if I were to come out of what I would say if this announcement made at £4,000 pounds, you know, it’d be full raising red flags, this is an absolute nightmare. At £10,000 I’d say this is disappointing, but of course, to be able to save £10,000 a year, you have to be pretty affluent anyway.”e not the same thing.”
Mr Lewis suggests a ‘starter investment ISA’ for young people. He explained: “So you’d do the same age as a lifetime ISA, which is under 40s, you’d be able to put 1000 pounds into it per tax year and if you put it in.
“Then for the first couple of years, you would get a 5% boost on top paid jointly by the financial services industry and the state, so that if for £1,000 pounds you put in, you get £10,050 pounds worth of investment, and that gives people some experience and some way to start to get into the market because we need to encourage, as opposed to try and say, oh, you know, the choice between a savings ISA and an investment ISA is like a choice between an Apple and a car. They ar
