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Cash ISA deposits to banks and building societies increased by 29% month on month to £4.2bn nationally. It’s also higher year-on-year by 13%, despite interest rates being lower.
Plum’s own data shows that Cash ISA account opens are up by 42% last week compared to the previous week.
The speculation about the reduction to the Cash ISA allowance is likely to have been a driving factor behind this, with many wanting to take advantage of the £20k allowance while it’s still there.
So while Reeves’ intention is to get more people investing, it appears her rhetoric is having the opposite effect for the time being.
The Chancellor has now confirmed her ISA reforms. While it’s a small saving grace that people have until April 2027 to adjust to the changes, it appears from the latest HMRC guidance that the Government is determined to prevent even cash-like funds being held within a Stocks and Shares ISA.
How this will be managed remains to be seen, especially when many people will use these funds, such as Money Market Funds, when they want to take some time to consider their next investment steps. There is a real danger that the Government forces people to make rushed decisions that are not in their interests.
The ISA reforms are made worse for savers since tax thresholds will be frozen for an additional 3 years until 2030-31, heightening the effects of fiscal drag, and means more people are now at risk of exceeding their respective savings allowances. Additionally, there is salt in the wound after the Government announced that higher rates of income tax will be applied to savings that sit outside of an ISA.
At least those over 65 will be exempt from these changes, so they can still deposit the maximum £20,000 into a Cash ISA.
The average easy access Cash ISA savings is just 2.05% so it’s important for people to shop around to make sure they’re getting the best deal on their savings, with some providers offering interest well above the base rate.
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