Just 7% of advisers and wealth managers think that the Government’s decision to cut the Cash ISA allowance will encourage savers to become investors, according to a new report.
The Government cut the Cash ISA allowance for savers under the age of 65 to £12,000 (from £20,000) a year from 6 April 2027 in the Autumn Budget. The overall ISA limit will remain at the current £20,000 in a bid to encourage more people to invest more of their savings, rather than just hold cash.
The report from wealth management trade body PIMFA shows limited support for the ISA reforms from financial advisers.
The figures have been published by the Personal Investment Management & Financial Advice Association (PIMFA) as part of its Regulatory Insights Tracker, its regular survey of member firms.
When asked which Budget announcement would have the greatest impact on retail investor behaviour, cuts to the Cash ISA allowance were cited most frequently (36%) by PIMFA members. However, just 7% of firms believe the move will encourage savers to become investors, suggesting that the policy alone is unlikely to drive a meaningful shift in behaviour.
Firms also remained sceptical about the proposed anti-avoidance measures announced by HMRC last year. Fewer than one in five (17%) agreed that investors should be restricted from holding cash in a Stocks and Shares ISA, while 62% disagreed with such an approach, believing it would undermine the ISA regime overall.
PIMFA member firms remained divided over the Government’s ambition to increase retail investment in UK equities specifically. When asked whether this is a realistic and desirable policy objective, just 41% of firms agreed. However, 43% of firms held no strong view, suggesting that many remain uncertain.
Simon Harrington, head of public affairs at PIMFA, said: “Building a culture of retail investment within the UK is a worthy goal and one that we fully support. The UK has £430bn sitting in cash deposits and lags behind other G7 countries in terms of direct exposure to equities. We support many of the initiatives which have been introduced to address this and transform a nation of savers into a nation of investors.
“However, our members and we are not convinced that the Government’s proposed changes to the ISA regime will have a demonstrable impact in building a culture of retail investment. More generally, we are extremely concerned that rather than support and encourage savers to take advantage of the Stocks and Shares ISA wrapper, these proposals will actually undermine it.”
PIMFA has previously argued that Government efforts to boost direct investment in the UK would be better supported by reviewing existing investor incentives, such as Stamp Duty, rather than introducing narrowly targeted policy interventions that ‘risk driving a superficial increase in investment activity rather than delivering sustained, meaningful participation’.