The chief executive of a top investment firm has issued a scathing broadside against the Chancellor’s proposal to restrict cash ISA limits.
In a letter seen by Sky News, AJ Bell chief executive Michael Summersgill wrote to Rachel Reeves that efforts to push Brits towards investing with limits on cash savings are “doomed to fail”.
Under current government plans, the cash ISA allowance will be slashed from £20,000 to £12,000 next year.
The AJ Bell boss slammed not only the principle behind the change, but also the “lack of proper process in implementing the planned changes”.
He wrote: “It is my strongly held view these unwieldy proposals are doomed to fail in their aim of encouraging more people to invest for the long term and represent a significant backward step for a product whose success has been largely down to its relative simplicity.
“Rushing to implement these changes, which represent a material intervention in the market with wide-ranging consequences, without a proper consultation or any clear evidence they will incentivise long-term investing represents the worst kind of policymaking.”
Meanwhile, Sky News has reported that a number of ISA providers have warned Treasury and HMRC officials of their worries about the changes.
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Alongside a cut to the headline cash ISA limit, new rules are being drawn up that would ban transfers from stocks and shares and Innovative Finance ISAs into cash instruments.
These restrictions have come under fire, with figures in the investment industry concerned that the changes would do little to boost investment whilst increasing complexity.
Summersgill warned in the letter that “the vast majority would simply opt for cash alternatives, such as NS&I bonds, or save in a taxable cash account”.
“As we warned Treasury officials on multiple occasions ahead of the Budget, this will harden the border between Cash ISAs and Stocks and Shares ISAs, making it less likely existing excess funds held in Cash ISAs will shift to long-term investing through Stocks and Shares ISAs,” he wrote.
He added: “Given there are 3 million people with at least £20,000 invested in Cash ISAs and nothing invested in Stocks and Shares ISAs, this represents a missed opportunity worth at least £60 billion.
“In the short term, people will rationally flock to Cash ISAs – the opposite of the policy intent – ahead of the allowance reduction in April 2027.”
The Chancellor has already watered down the plans, with reports ahead of the Budget in November of a £10,000 limit being watered down.
