Nationwide, Britain's largest building society, has voiced concerns over potential government plans to cut tax breaks on cash Individual Savings Accounts (Isas), warning that such a move could hinder first-time buyers' access to mortgages. The current cash Isa limit of £20,000 annually has been in place since 2017, a significant increase from the previous £3,000. These accounts are crucial for banks and building societies as they use these deposits to fund loans to households and businesses.
The government is contemplating reducing the maximum deposit into cash Isas from £20,000 to £4,000 per year. This proposal has prompted a strong response from major savings providers who have pledged to resist any attempts to diminish the tax advantages of cash Isas. The potential change has sparked a debate on the best ways to encourage savings and investment.
A Treasury spokesperson emphasized their commitment to fostering financial resilience across the country, stating:
"We want to help people save for their future goals and build greater financial resilience across the country. We keep all aspects of savings policy under review."
The two main types of Isas are cash Isas and stocks and shares Isas. Currently, individuals can save up to £20,000 each tax year across these options, either by spreading their money between multiple Isas or focusing on one. Some fund managers have been lobbying Chancellor Rachel Reeves to focus more on stock market investments to boost economic growth. The average stocks and shares Isa yielded an 11.86% return over the past year, compared to a 3.8% return for cash Isas, according to Moneyfacts.
Meetings have taken place between senior City executives and Chancellor Reeves, discussing the possibility of limiting the cash Isa allowance to £4,000 per year. The Telegraph reported on these discussions, highlighting the ongoing deliberations among financial leaders.
Robin Fieth, chief executive of the Building Societies Association, noted that many individuals consciously choose to save in cash rather than opt for stocks and shares, highlighting the importance of maintaining the current structure to support diverse saving preferences.