The announcement is a major U-turn for Rachel Reeves, who had long hinted she was considering lowering the limit to £4,000 to encourage more people to invest in the stock market.
“I’m not going to reduce the limit of what people can put into an Isa, but I do want people to get better returns on their savings, whether that’s in a pension or in their day-to-day savings,” she said.
“But I absolutely want to preserve that £20,000 tax-free investment that people can make every year.”
However, concerns have increasingly been raised by City figures that the reforms will not have the desired effect.
square ISAS Five things to know about Reeves's cash ISA reform in five minutes
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Banking lobby group UK Finance, which reportedly hosted the meeting, has since cautioned against any changes “to avoid restricting consumers’ options”.
“However, changing the cash Isa limit will not do that, so therefore it’s the wrong tool to achieve the policy outcome.”
Hinting at the initial plans for the reforms in February, Reeves explained that she wanted to create “a culture… of retail investing” to achieve “better returns” for UK savers.
She told a committee meeting in the House of Lords earlier this year: “Why have we got hundreds of billions of pounds in cash Isas? We have failed to drive an investment culture.”
Soon after, the Treasury announced that a comprehensive overhaul of Isas would be “under review” in advance of the Autumn Budget later this year.
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