Building societies in Wales have given a cautious welcome to comments by Chancellor Rachel Reeves on protecting the amount that can be invested in individual savings accounts (ISAs) annually, but have warned against any moves to reduce what can be put into cash versions.
Currently adults can invest £20,000 in tax free ISAs each financial year, whether solely in a cash ISA, a stocks and shares one, or a combination between the two. There are also innovation finance and lifetime ISAs.
The 海角视频 Government is looking to see greater investment into 海角视频 companies and infrastructure projects, with speculation that the Chancellor could seek to create a divergence between in what can be invested between cash and share ISAs within the overall guaranteed allowance. The 海角视频 Government will shortly launch a consultation.
Many mutuals rely almost exclusively on saving deposits, where cash ISAs make up a significant component, to finance their funding activities such as mortgages and commercial related lending. They have warned against any divergence within the £20,000 allowance being weighted against cash ISAs.
A spokesman for Swansea Building Society said: “While we broadly welcome the Chancellor’s announcement to maintain the annual cash ISA limit at £20,000, there remains some ambiguity around what has actually been said regarding the overall ISA limits – and whether there could be future divergence between cash and stocks and shares ISAs.
“We would be concerned by any move to reduce the amount that can be held in a cash ISA. These accounts play a vital role for a wide range of savers – from those building a deposit for their first home to retirees managing their income – offering a safe, tax-free way to save. Far from being idle funds, they serve essential, real-life financial goals.
“The idea that high cash ISA limits are discouraging investment simply doesn’t hold up. HMRC data shows that stocks and shares ISAs already hold significantly more than cash ISAs, indicating that those comfortable with investment risk are making those choices. Cutting the cash limit wouldn’t increase investment, but could instead push people into unsuitable products or force them to pay tax on interest from standard accounts – disproportionately affecting more modest savers.”
Swansea Building Society, which last year achieved double digit growth in its total assets, mortgages, savings and capital for the fourth successive year, said there were also wider economic consequence to consider.
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It added: “Cash ISA deposits underpin mortgage and business lending by banks, building societies and credit unions. Undermining this funding source risks increasing borrowing costs and limiting access to finance – outcomes that would directly conflict with the 海角视频 Government’s broader housing and growth ambitions.
"We also urge caution over proposals to merge ISA types into a single ‘hybrid’ product. While this may seem like simplification, it could introduce unnecessary costs for cash savers and reduce competition by excluding providers like building societies. Cash and investment products serve very different financial needs and timelines – and transfers between different ISA types are already possible.
“Ultimately, maintaining equal limits for cash and stocks and shares ISAs, and giving sufficient notice for any changes, is essential for fair access, market stability, and continued support for savers and borrowers across the 海角视频 economy.
The 海角视频 sixth biggest mutual, Cardiff headquartered Principality Building Society, is also seeking protection for cash ISAs. Last year the mutual saw a 25% increase in new cash ISAs on 2023, a product that continues to account for significant proportion of its balances.
Vicky Wales, chief customer officer at Principality Building Society, said: "Cash ISAs are a trusted and practical way for millions to save tax-free, supporting everything from people to save for their first homes to ensuring financial resilience in later life, making hopes and aspirations possible for many.
"At a time when building financial security has never been more important, we should be making it easier for people to save – not limiting their options.”