Two fifths (40%) of cash ISA savers do not believe the impending cut to the cash ISA allowance will make a difference in encouraging people to invest, according to AJ Bell.
A further 19% believe the changes will actively discourage people from investing, with just 24% believing people will be more likely to invest.
The Government plans to reduce the cash ISA allowance from £20,000 to £12,000 for under-65s from April 2027, with the overall ISA allowance remaining at £20,000.
However, AJ Bell said as many as two in five (38%) Brits believe the changes will make the ISA landscape more complex and confusing.
Rachel Vahey, head of public policy at AJ Bell, said: “New research lays bare the huge potential miscalculation by the Government with its impending cut to the Cash ISA allowance from next April, echoing concerns expressed across the retail investing industry.
“Two-in-five cash ISA holders said the changes would make no difference to the behaviour of savers when it comes to making that first step to invest for the long term, with an additional fifth believing they will actively deter people from investing. Although the chancellor might be keen to point to those who believe the changes will achieve the Government’s stated aims, this cohort makes up just 24% overall – far from a vindication of the policy among cash savers.
“It illustrates the new rules will introduce massive complexity for virtually no benefit, with the number of people put off investing cancelling out those who think it might nudge them from saving to investing.”
AJ Bell said in order to prevent people findings ways around the new rules, it is likely that the Government will need to implement a ban on transfers from stocks and shares ISAs to cash ISAs but it is also considering implementing a tax charge on cash and ‘cash-like’ investments held in investment ISAs for those under age 65.
Yet, a third (33%) of Brits said such stringent measures could deter them from using stocks and shares ISAs altogether.
Vahey said: “Cash and cash-like investments play a central role in retail investing through ISAs, so any move to drastically restrict either would risk weakening the very product the Government wants to encourage more people to use.
“Creating a tax charge on cash and cash-like investments would also undermine the tax-free status of stocks and shares ISAs and risks penalising sensible investing behaviour. On top of this, it threatens to lump considerable administrative strain on providers who would be forced to implement this convoluted approach.”
Vahey added: “The data emphasises the potential drawbacks of government pursuing a route that is riddled with complexity, with the result that ultimately many savers could simply turn their noses up at investing altogether. It is essential that government listens to the concerns of ISA providers and instead chooses a lighter touch approach that does not directly contradict its entire rationale behind the policy.”
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