Building societies urge retention of cash ISA limits amid proposed cuts

In the UK, building societies have expressed concerns over the government's potential changes to cash ISA limits. As part of a broader economic strategy, Chancellor Rachel Reeves is anticipated to announce a reduction from the current £20,000 annual allowance during her Mansion House speech set for July 15, 2025. This proposal aims to encourage personal investments rather than traditional savings. However, the Building Societies Association (BSA), backed by several prominent leaders and institutions, argues against this move, emphasizing the critical role that cash ISAs play in the financial ecosystem. According to them, an estimated 40% of all cash ISA balances are held by building societies and these accounts are essential for those saving for various life stages, such as home ownership and retirement. The BSA warns that reducing cash ISA limits could lead to higher interest rates and fewer lending options for mortgages and loans, adversely affecting households and the wider economy. Additionally, experts have voiced skepticism about the efficacy of reducing cash ISA caps as a strategy to boost investment behavior among consumers. They note that savers usually prefer to keep funds in non-ISA accounts rather than investing them, resulting in heightened tax implications. Critics assert that a successful shift towards investing would require long-term, well-coordinated reforms alongside efforts to increase consumer confidence in the market rather than merely adjusting ISA limits. Hence, the BSA has called for a more consumer-first approach when considering ISA regulation changes to maintain trust and avoid undermining one of the most successful savings products in recent history.