UK depositors save an additional £2 billion in cash ISA accounts, possibly in anticipation of potential reforms
Bank of England Reports Increase in Cash ISA Deposits, but No Changes to Limit Announced
In a recent development, the Bank of England's latest Money and Credit report has revealed a significant increase in cash ISA deposits during the first three months of the 2024-2025 financial year compared to the same period the previous year.
The report also showed that household deposits with banks and building societies increased by £7.8 billion in June compared to May. This trend continued in June 2025, with an uptick to £3.6 billion in cash ISA deposits compared to £3.4 billion in the same month the previous year.
However, contrary to rumors and expectations, Chancellor Rachel Reeves announced during her Mansion House speech on 15 July that there will be no changes to the cash ISA limit for the time being. The current limit remains at £20,000.
The proposed cuts to reduce the £20,000 annual cash ISA allowance had been a topic of discussion, with advocates hoping that such a move would incentivize Brits to invest more into stocks and shares. However, these plans have been put on hold as of July 2025.
The rationale behind lowering the cash ISA limit was to nudge savers away from low-yield cash savings into higher-return investments such as stocks and shares ISAs, with the aim of boosting the UK economy and stock market. Advocates argue that redirecting ISA funds towards equities could strengthen the London Stock Exchange and improve long-term returns for individuals, as stocks generally offer better growth than cash.
Some experts suggest merging Cash and Stocks & Shares ISAs to simplify investment choices and enhance market participation. Richard Stone, CEO of the Association of Investment Companies, is among those who support this idea, suggesting that ISAs only offering cash options should have lower contribution limits.
However, there are concerns and skepticism about whether such a policy would effectively change saver behavior. Critics like Martin Lewis warn that reducing the cash ISA limit might simply frustrate savers without substantially increasing investment in UK equities, especially since stocks held in ISAs may include foreign shares which historically have outperformed UK-listed stocks.
Many building societies and financial groups have opposed the cut to protect the popular cash savings option and maintain flexibility for savers. Andrew Gall, head of savings and economics at the Building Societies Association, advocates maintaining the cash ISA limit and launching a public awareness campaign to help beginner investors get started.
Despite the potential reforms to the cash ISA limit causing concern among British savers, the Bank of England reported that British savers deposited £21.5 billion into cash ISAs from April to June 2025, an increase of £2.2 billion compared to the same period in 2024.
In summary, while reducing the cash ISA limit was considered as a means to shift UK savers toward investment and stimulate economic growth, no such change has been implemented or announced. If it were introduced in the future, it could encourage more investment in stocks but also risks alienating savers who prefer cash safety and liquidity.
- Given the increase in cash ISA deposits and the continuous trend of household deposits with banks and building societies, individuals may want to reconsider their personal-finance strategies and explore avenues for investing some of their savings.
- Despite the possibility of merging Cash and Stocks & Shares ISAs to encourage higher-return investments, concerns remain about whether such a policy would effectively change saver behavior and whether reducing the cash ISA limit might lead to diversified investments or simply frustrate savers.
- The current financial environment, with no changes to the cash ISA limit, provides an opportunity for those interested in personal-finance to develop a well-rounded investment portfolio, considering both cash savings and stocks as part of their long-term investment strategy.
