Could an ISA shake-up get the nation investing?
After weeks of speculation, Chancellor Rachel Reeves will finally deliver the autumn budget on Wednesday. It could well be a watershed moment for British savers, as reports suggest that Reeves is preparing to overhaul ISAs.
The rumoured plans range from halving the Cash ISA allowance to £10,000, to requiring minimum UK equity holdings and offering stamp duty breaks – echoing the previous government’s plans for a “Brit ISA”. Reeves’ ambition is clear: get Britain investing again, channel billions into UK equities, and build what her City Minister, Lucy Rigby, recently referred to as a “shareholding democracy”.
But will this gambit pay off and transform a nation of cautious savers into confident investors? My view is that the Chancellor is right to question the status quo, but we need to be digging deeper into what’s really holding people back from investing.
Naturally, there is bound to be backlash from building societies and providers over any proposed ISA caps, but some are already quietly proving that you don’t need caps on cash to get people investing.
The case for investing
Cash ISAs are, without a doubt, the most popular savings product among Brits, but with an estimated £360bn locked away (according to HMRC data), it only seems fair to question whether people are thinking enough about long-term goals, and the negative impacts of holding only cash versus the potential upside of investing.
When you consider that inflation is currently running at about 3.8% according to the latest government data, savers in many cash products are not getting a good deal and they could well be at risk of a real-terms loss.
Combine that with the fact that equity markets have historically delivered significant returns above inflation, and the case for investing becomes a lot clearer.
In fact, over the long term, the difference can often be transformational: as Lucy Rigby, the Economic Secretary to the Treasury, recently pointed out, someone saving £1,000 annually in a Cash ISA since 1999 would have £34,000 today, but if they’d invested, they’d have £83,000.
The real barriers facing savers
Of course, there will always be a place for cash, especially for rainy-day savings and short-term goals. Not to mention that people know where they stand with cash – the relative security and stability is hard to pass up. But what we need to do is address the more fundamental issues facing people’s approach to, and understanding of, long-term saving.
I believe that the barriers are less to do with apathy and ignorance, and more about confidence and accessibility. When investing often feels like entering a foreign country where you don’t speak the language, is it any wonder people want to stick with what they know?
The financial services industry has wrapped investing in layers of jargon – we talk about ‘asset allocation’, ‘risk-adjusted returns’, and ‘portfolio diversification’ – when all people want is to be spoken to in clear-cut terms, such as: “Is investing suitable for my situation?”; “How much growth can I expect to see?”; “What happens if I need access to my money?”
Let’s focus on offering clarity. We need to think about how we present investment options, how we explain risk and return, and how we support people through their investment journey.
Most importantly, we need to show people that investing doesn’t have to be an all-or-nothing decision – they can start small, choose simple diversified funds, and adjust as their confidence grows. Crucially, they can hold both cash and investments in the same ISA.
Simplicity and ease of use are also a big factor. As well as jargon-free language, we need straightforward digital-first processes – opening an account in minutes on a phone, switching between cash and investments with a few taps, consolidating old ISAs without a single form to print.
The government could help with this, by pushing for standardisation and simplification across the industry. Why does transferring an ISA still feel like navigating a bureaucratic maze? Why do providers make it so difficult to consolidate savings?
These are just some of the systemic issues facing savers that need to be fixed. And while the latest “Brit ISA”-style proposals for minimum UK shareholdings and stamp duty breaks have the potential to boost British markets, they risk adding yet more complexity when what savers really need is less.
In conclusion
Our experience at NatWest Cushon shows that when you strip away the complexity, simplify the language, and focus on customer experience, those behavioural barriers begin to fade away, and we see much more confident savers.
We offer workplace ISAs that sit alongside pensions, bringing all the behavioural advantages that made auto-enrolment successful – collective participation, employer support, and trusted guidance. But we’ve gone further. Instead of building walls of jargon around investing, we keep it simple: whether it’s a pension or an ISA, it’s about putting money to work to “build a feel good future”.
Our data shows that our approach is paying dividends – quite literally! Employees with workplace ISAs are more likely to choose investment options over cash. In fact, nearly 90% of our ISA holdings are in investments rather than cash. That should go some way to telling you that it’s not about caps and removing choice – it’s about making the right choice easier.
Overall, I’m supportive of measures that genuinely boost the British economy whilst improving outcomes for savers. But let’s not lose sight of the real goal: getting people investing confidently.
We need to ensure any reforms focus on breaking down barriers to investment, rather than introducing yet more rules and layers of complexity. Because if we want to build a “shareholding democracy”, we need to simplify, not complicate.
Supplied by REBA Associate Member, NatWest Cushon
NatWest Cushon is a workplace pensions and savings provider with an award-winning proposition.
