Are investment ISAs changing too?

While the cash ISA allowance is being cut for under-65s, the overall ISA allowance will remain at £20,000. This means anyone can keep adding up to £20,000 a year into their stocks and shares ISA.

However, the government is weighing up some other changes. Firstly, it is considering whether to impose a charge on the interest paid on uninvested cash held in stocks and shares ISAs.

It has also warned that some funds may be too ‘cash like’ to live in investment ISAs. Details have yet to be announced, but it could mean that money market funds – and similar low risk investments – will be restricted in some way.

For now, no changes have been confirmed.

Money market funds – also known as cash funds – act a bit like variable-rate savings accounts. They are very low risk and aim to track UK interest rates. They do this by investing your money in things like government debt and bonds from reputable companies. Savers’ money is pooled with other investors and used to purchase these assets in the pursuit of growth.

Crucially, these investments are very high quality, liquid, and diversified. This means the funds themselves are low-risk and stable. However, they are still a type of investment, meaning you currently hold them within stocks and shares ISAs.

Have LISAs been scrapped?

No immediate changes to Lifetime ISAs (LISAs) have been announced. However, these accounts are due to be phased out over time. The government plans to consult on a new scheme for first time buyers that will eventually replace them. In the meantime, it is still possible to open a LISA and existing account holders can save into them “in line with the existing rules indefinitely”.

LISAs allow adults aged between 18 and 50 to deposit £4,000 a year. The government will add a 25% bonus to those savings, up to a maximum of £1,000 per year. The money can be used either to buy a first home or after the age of 60. It can also be accessed without penalty if you are terminally ill. Withdrawals for any other reason are normally subject to a 25% charge.

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