Millions of savers will be encouraged to put their money into stocks and shares where they can earn better returns but also risk making a loss, under changes announced by Chancellor Rachel Reeves. But the Chancellor has ruled out cutting the amount people can put into a safer cash ISA – at least for now. Instead, she said she would keep potential changes under review.
Treasury minister Emma Reynolds said: ”Helping people take advantage of better returns from investing is key to better financial health, giving them a stake in a growing economy and connecting promising businesses with capital. These reforms will make the UK the best location for financial services firms and tear down barriers to investment to growing our economy and making families better off.”
Savers are currently allowed to put up to £20,000 every year into an ISA, and any interest or gain on this investment is tax-free. Options include a cash ISA, with interest paid, or a stocks and shares ISA, which may grow in value and can pay dividends, but can also potentially fall in value, making them a gamble.
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Ms Reeves had been considering limiting the amount that can be saved in a cash ISA, to encourage more people to invest at least part of their money in stocks and shares. But she has backed down following opposition from building societies and campaigners for the elderly.
Instead, she is to tell financial service industry leaders that banks will, for the first time, send investment opportunities to savers with cash sitting in low-interest accounts – with up to 29million people affected.
In addition, major financial institutions – including high street banks – are backing an advertising campaign that will highlight the opportunities of investing for consumers who are able to do so.
Under current trends, moving £2,000 from a savings account to stocks and shares could make millions of people over £9,000 better off in 20 years’ time.
The plans to boost people’s savings and the economy were unveiled by the Chancellor at a summit of top finance executives in Leeds and will be highlighted again in her Mansion House speech.
Ms Reeves told executives that: “We fixed the public finances and stabilised the economy. Now we need to double down on our global strengths to put the UK ahead in the global race for financial businesses – creating good, skilled jobs in every part of the country and helping savers’ money go further through our Plan for Change.”
Business Secretary Jonathan Reynolds said: “Financial services are a UK success story, and one of the eight sectors we identified with the biggest potential for growth in our modern industrial strategy.
“This sector plan will help make the UK the number one destination for financial services by 2035 and is all about delivering on our Plan for Change to boost the economy and put more money in people’s pockets.
The Treasury argues that stocks and shares have performed significantly better than cash savings accounts in recent decades. According to some industry estimates, more than 29million adults across the UK have cash sitting in a low-interest rate account offering around 1% – while the average return for stocks and shares over the last 10 years is around 9%.
If those savers invested £2,000 today, they could have £12,000 in 20 years’ time. This compares to £2,700 if they held this money in a cash account offering 1.5% at the current interest rate, making them over £9,000 better off.
The industry-led ad campaign will help to explain the benefits of investing, and from April 2026 the Financial Conduct Authority will roll out Targeted Support – allowing banks to alert customers about specific investment opportunities to consider shifting money from a low-return current accounts to higher-performing stocks and shares investments.
Alongside a review of risk warnings on investment products to make sure they help people to accurately judge risk levels, this will guide people through a key barrier to investing – getting lost between large number of investment products on offer.
The Government will continue to consider reforms to ISAs and savings to achieve the right balance between cash savings and investment.
As a first step, the Government will allow Long Term Asset Funds to be held in Stocks & Shares ISAs next year, allowing more individuals to invest in assets that will support the UK’s future success, like innovative businesses and infrastructure – which can also deliver better returns.
David Postings, chief executive, UK Finance, said: “Financial services are vital to the UK economy and I strongly welcome the Chancellor’s support for our sector as one of the UK’s global strengths.
“We submitted a range of ideas to government to help support growth and the UK’s position as a global financial centre. Across many of these key areas the Chancellor has listened and delivered significant positive change.”
Charlie Nunn, chief executive, Lloyds Banking Group, said: “We welcome the ambition shown in the Leeds Reforms to unlock investment, boost financial resilience, and support long-term economic growth. As a sector, we have a vital role to play in helping customers make the most of their money and in facilitating investment and innovation that benefits communities and businesses across the UK.”
