'Rachel Reeves has listened': 'Meaningful' £12,000 cash ISA limit and exemption for over-65s hailed by building societies

Online hubs will be set up, designed “to help people invest” in the UK, the Chancellor said.

The Chancellor told MPs: “From April 2027, I will reform our Isa system, keeping the full £20,000 allowance while designating £8,000 of it exclusively for investment, with over-65s retaining the full cash allowance.

“And thanks to our changes to financial advice and guidance, banks will be able to guide savers to better choices for their hard-earned money. Over 50 per cent of the Isa market – including Hargreaves Lansdown, HSBC, Lloyds, Vanguard and Barclays – have signed up to launch new online hubs to help people invest here in Britain.”

The decision follows months of speculation about plans for a cut to cash ISAs, with previous reports that the limit could be set as low as £4,000.

An expected announcement in July was delayed days after the chief executives of the Yorkshire and Leeds Building Societies, as well as Skipton Group, were among more than 50 financial experts to sign an open letter to the Chancellor urging her not to go ahead with a cut to the current limit. Mutuals have argued the change would impact their ability to offer affordable mortgages and loans

Reacting to the confirmed announcement in the Budget, Susan Allen, Chief Executive at Yorkshire Building Society, said: “While we’re disappointed to see the allowance reduced, we welcome the fact that the Chancellor listened to calls from us and the wider mutual sector not to cut it dramatically.

"Retaining a meaningful limit is vital for savers and economic stability.

“We’re also pleased the £20,000 allowance remains for those over 65, as flexibility for retirement planning is crucial.

"Our research shows that only one in ten over-60s would consider stocks and shares, so maintaining secure, accessible options matters — especially for our members.

“We recognise the value of investing in stocks and shares where savers understand and can accept the risk involved. However, people nearing retirement should not feel pressured into options that may not meet their needs. Cash ISAs offer a safe, simple way to save and remain an important option for those who prioritise security.”

Cash ISAs play a crucial role in helping people build financial resilience, achieve life goals, and feel secure about their future. Every pound saved in a Cash ISA with a building society helps fund mortgage lending — supporting first-time buyers, families, and new homes across the UK.

Susan added: “It is important that we keep ISAs simple, accessible, and effective, without penalising those who prefer the security of cash savings.”

Leeds Building Society also welcomed the exemption for over-65s.

Catherine Wray, Senior Savings Manager at Leeds Building Society, said: “We’re pleased that the government has listened to the concerns that we have consistently raised on behalf of our members.

“Protecting a £20,000 annual tax-free Cash ISA allowance for older savers with a lower appetite for risk will provide reassurance to millions who rely on those cash savings.

“Whilst we accept that investing in stocks and shares is the right choice for some people, it’s not suitable for everyone. Reducing the cash ISA allowance for under 65s risks limiting options for those who need certainty and flexibility for shorter-term goals, such as saving for a house deposit.

“There is still plenty of time for savers to maximise their current allowance before the changes are implemented in 2027, and existing balances will be unaffected by all reforms.

“The upcoming changes underline the importance of people reviewing their savings, and we encourage everyone to put money away where possible. That includes making use of tax-free saving in Cash ISAs when the new £12,000 allowance comes into force from April 2027.”

But this decision was questioned in other quarters. Tom Selby, director of public policy at AJ Bell, said: “The decision to exempt over 65s from the Cash ISA cut is frankly bizarre given pensioners will in the main be prioritising taking an income from their funds rather than piling in £20,000 a year. All of this adds up to massive extra complexity and friction in the ISA system, rather than the simplification Labour promised ahead of the general election.

“It is hard not to see this as a massive missed opportunity. Instead of focusing on the needs of investors by ripping down the barriers between holding cash and investing for the long term, the government has chosen to stiffen that barrier and make the ISA system more difficult for ordinary people to navigate.”

Alex Sitaras, head of savings and partnership products at Skipton Building Society, said it is now important savers get suitable financial advice in advance of the reforms.

“Today’s announcement has understandably rattled a lot of Cash ISA savers, particularly those under 65. We’re hearing already is a mix of frustration, confusion and, for some, real concern about making the wrong move. But there are still plenty of smart, tax-efficient options available – the key is understanding which ones genuinely fit your goals.”

Meanwhile, the Quoted Companies Alliance which represents publicly listed companies, welcomed the Chancellor’s ISA reforms.

James Ashton, CEO of the Quoted Companies Alliance, said: "Today’s ISA reforms are a welcome step towards encouraging wider retail participation in UK public markets. A simpler system can channel more savings into UK growth companies across the regions, supporting local jobs and driving long-term wealth creation."