Rachel Reeves’s planned cash ISA reform has triggered a rise in saving activity, with under-65s set to lose the ability to place the full £20,000 annual allowance into cash from April 2027. The change will reduce the cash ISA allowance for those under 65 to £12,000 a year, while keeping the overall ISA limit at £20,000. The remaining £8,000 will be reserved for investments, as the Government seeks to encourage more use of stocks and shares ISAs.
The shift has already affected behaviour. According to AJ Bell’s Sarah Coles, savers are “filling their boots” while they still can, using the final tax year before the new rules take effect. The policy was announced in last year’s Budget and is scheduled to apply from the 2027/28 tax year. It will affect people born after 1961, while those over 65 will retain the full cash allowance.
Savers Move Quickly Before the Allowance Is Cut
The current rules allow adults to place up to £20,000 a year into ISAs, including cash Isas. From 6 April 2027, people under 65 will only be able to put £12,000 of that amount into cash. According to the figures reported, £12 billion was paid into cash ISAs in April 2026, one of the highest monthly totals on record. Coles said the “dash for cash ISAs” in May, following that April surge, showed the unintended consequences of reducing the allowance.
Her comments point to a simple response from savers: many are using the existing rules before they change. The Government’s aim was to push more people towards investment products, but the immediate effect has been a rise in cash ISA deposits.
Reeves said in the Budget that the full £20,000 ISA allowance would remain, but £8,000 would be “designated exclusively for investment” for those under 65. She also said over-65s would keep the full cash allowance.
The change is part of a broader attempt to alter saving habits. Reeves said banks would be able to guide savers towards different choices, and that several major ISA providers, including Hargreaves Lansdown, HSBC, Lloyds, Vanguard and Barclays, had signed up to launch online hubs to help people invest in Britain.
Cash Remains Central to Household Finances
Coles said cash still plays a “vital role” in people’s finances. According to AJ Bell, working-age households typically need enough accessible savings to cover three to six months of essential spending, as well as money for planned one-off costs over the next five years.
Beyond that, Coles said some savers may consider whether a stocks and shares ISA is a better place for part of their money. She noted that markets can rise and fall in the short term, but have a better chance of beating inflation over the long run.
According to Birmingham Mail, there was also a shift within savings accounts during the month. Money moved out of easy-access accounts, while some savers moved into fixed-rate products. Coles linked this to inflation expectations and competition in the fixed-rate market, which had pushed rates higher while easy-access rates had stagnated.
She said savers often keep too much money in easy-access accounts because it feels more comfortable to have it close at hand. The current activity, she suggested, is a reminder to consider how much cash is needed soon and how much can be tied up for longer.
