Cutting the cash ISA tax-free allowance will affect a fifth of savers’ ability to get on the housing ladder, research from a mutual found.
According to a survey of 2,000 cash ISA holders carried out by Nottingham Building Society, this rose to 41% among those aged 25-34, who said a cut to the allowance would negatively impact their homeownership prospects.
More than a third – 34% – of savers said this would hit their ability to save for retirement, while 36% said it would affect their chances of building an emergency fund.
Nottingham Building Society also found that the cut to the allowance, which has been proposed to be reduced from £20,000 to £4,000, will not encourage people to invest elsewhere.
Just 38% of those polled said they would consider putting money into a stocks and shares ISA, while a third will save less money instead.
More than half – 55% – of those polled did not agree with the lower cash ISA allowance, and this rose to 76% of respondents aged over 55.
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Some 78% of respondents said the government should promote tax-free allowances instead.
Nottingham Building Society has asked the government to reconsider cutting the allowance.
Harriet Guevara, chief savings officer at Nottingham Building Society, said: “Cash ISAs are an essential tool for millions of savers across the UK, allowing them to save for key life moments like buying a house or planning for retirement. With economic uncertainty high and the appetite for these products strong, limiting people’s ability to save towards their goals and to build a financial safety net would be the wrong step at the wrong time.
“While we support the government’s broader efforts to stimulate economic growth and drive investment in UK businesses, there’s no guarantee that reducing the cash ISA allowance would actually help. What’s worse, there’s real concern that it will simply lead to people saving less. Our research is clear: limiting how much people can put into a cash ISA won’t immediately lead to a rush into stocks and shares ISAs instead.”
She said the mutual had seen a “significant appetite” for its cash ISA products in recent years, adding: “Cutting the cash ISA allowance would be a massive blow to millions across the UK. We urge the Chancellor not to restrict this vital savings tool, and to provide peace of mind by confirming as a matter of urgency that the annual allowance will be staying as is.”
