New Cash ISA rules for over-65s and older people will be put in place under new Prime Minister Andy Burnham and his new Chancellor of the Exchequer John Healey.
Speculation ove drastic cuts to Cash ISA allowances overshadowed much of former Chancellor Rachel Reeves’ tenure, but eventually she announced that under-65s would see their annual deposit limits on the tax-free savings accounts cut to just £12,000.
But over-65s (not all of whom are state pensioners, as state pension age is now 66 rising to 67), will be given a special exemption and allowed to keep a full £20,000 annual limit.
State pension age is 66, rising to 67, which means all state pensioners will be eligible for the new Cash ISA protections, as well as those aged 65 and over who have not yet hit state pension age.
In her Autumn Budget, Reeves announced a long anticipated and much feared cut to Cash ISAs, despite objections from prominent financial campaigners like Martin Lewis, although the MSE founder welcomed the exemption for older people, which was something he was pushing for.
Under the new rules, savers will still be able to put £20,000 a year into tax-free ISAs like they can now, but Cash ISAs will be limited to just £12,000, instead of the full £20k. Those wanting to use the full £20k allowance will have to put the other £8,000 into a Stocks and Shares ISA instead.
But state pensioners will be allowed to keep the full cash allowance, Ms Reeves said in her speech.
Cash ISAs, which allow savers to put money away and hide it from tax each financial year, have been the subject of scrutiny. At one point, rumours suggested the limit could be set as low as £10,000.
Online hubs will be set up, designed “to help people invest” in the UK, Rachel Reeves said as she set out reforms to the ISA system.
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% 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.”
Savers who would usually exceed that amount will need to find alternatives before the change is put in place, such as using Stocks and Shares ISAs, but the change will not affect existing deposits.
New Prime Minister Andy Burnham will now be the one in charge when these new rules are put in place, starting in April 2027.
Mr Burnham has also committed to keeping the state pension triple lock and will stick with Reeves’ Income Tax exemption for state pensioners too.