Rachel Reeves is under fresh pressure not to cut the cash ISA limit after building societies penned an open letter to the chancellor, describing them as “a vital role in the broader economy”.
The chancellor is expected to announce a cut from the current £20,000 per person annual allowance during her Mansion House speech on July 15, as part of a push to encourage people to invest more widely.
But the Building Societies Association (BSA) is now pleading with her to leave the popular savings product untouched.
Nationwide chief executive Debbie Crosbie is among the signatories, along with leaders from Skipton Group, Yorkshire Building Society and the Scottish Building Society. They are joined by organisations such as the Institute of Customer Service, the Investing and Saving Alliance and, significantly, the UK’s largest investment platform in Hargreaves Lansdown.
In the open letter, they described cash ISAs as “a cornerstone of personal savings for millions”.
It continued: “The funds deposited in these accounts support lending, helping to keep mortgages and loans affordable and accessible.
“Any significant reductions to the cash ISA limits would make this funding more scarce which could have the knock-on effect of making loans to households and businesses more expensive and harder to come by.
“This would undermine efforts to stimulate economic growth, including the government’s commitment to delivering 1.5 million new homes.”
The plan to cut cash ISA rates as a means to encourage investing has been widely dismissed as unlikely to work by industry experts, at least as a standalone method.
Data has also shown those who tend to save more, instead of investing excess funds, would simply look to save it in a non-ISA account instead, potentially paying tax when previously they did not - and therefore decreasing peoples’ wealth rather than adding to it.
Building societies collectively hold more than half a trillion pounds in assets, with residential mortgages totalling £395bn - almost a quarter (24 per cent) of all those in the UK. Building societies also account for 40 per cent of all cash ISA balances.
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Robin Fieth, BSA chief executive, said: “Cash ISAs are used for a wide range of purposes—from saving for a first home to managing finances in retirement. These are not idle funds; they serve real, practical needs for both savers and the building societies, banks and other providers that receive the funds, and use them to support mortgage and other lending.
“Simply changing ISA limits is unlikely to encourage people to invest, but it will hurt people who are responsibly saving for short-term goals, where investing may not be appropriate.”
Cecilia Mourain, savings officer at Moneybox, added: “At Moneybox, over one million people are saving and investing through tax-wrapped accounts on our platform, many of them on modest incomes. We know that a cultural shift towards investing won’t come from cutting the Cash ISA allowance, it will come from working with the industry to build confidence among savers.
“Any changes to the ISA regime must be long-term, consumer-first, and coordinated with broader regulatory reforms, such as the FCA and Treasury’s Advice Guidance Boundary Review. Without this, the government risks undermining trust in one of the most successful savings products of the last 25 years.”
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