Cutting ISA limits won’t shift commitment to cash

87% of UK adults with cash ISAs won’t invest in stocks and shares if the cash ISA allowance is reduced, according to new research from KPMG UK¹. Most will put any remaining money into savings (53%). Others said they would put any excess money into (pensions (14%), current accounts (13%), or will spend it (7%).

KPMG also found:

• Potential reforms will have little impact on cash ISA usage: 58% of UK adults with a cash ISA say that potential reforms won’t impact their use of cash ISAs, while 16% wouldn’t hit the limit anyway.
• The young and old aren’t swayed by stocks: 55 to 64-year-olds are the least likely (10%) to invest in stocks and shares if cash ISA incentives are reduced. Followed by over-65s (13%) and 18 to 24-year-olds (20%). Those between 25 and 34 years old are the most likely (55%) to put any remaining money into stocks and shares.
• More than a third of people are not aware of cash ISA reforms: 37% of UK adults have not heard about any proposals to reform cash ISAs, rising to over half (52%) of 18 to 24-year-olds. This is followed by 45% of 35 to 44-year-olds who have never heard about the proposals.

Neil Connor, Head of Wealth and Asset Management, KPMG UK, said:

“ISAs have proved a brilliant product to get the UK saving, but that has not led to greater investment in the stock market.

“Savers remain firmly rooted in cash, with many unlikely to pivot into equities even if the cash ISA allowance is cut. This is particularly true for 18 to 24-year-olds, who, despite having the longest investment runway, are among the least inclined to move into stocks and shares, and for over-55s, whose strong preference for stability means they are similarly reluctant to shift. It’s a small portion of the UK population who exceed the ISA limit every year – catering for those with less to invest will be the key challenge.

“A change to the cash ISA policy in isolation is therefore unlikely to create a nation of investors. Instead, a meaningful push towards greater financial education, combined with lenders taking a more proactive role guiding customers through the transition with more advice-led and tailored investment products, could drive more significant behaviour change.”