Money saving expert Martin Lewis has publicly criticised the government's planned changes to Cash ISAs, labelling the approach as 'the wrong way' to encourage investment among younger savers.
Budget Announcement Sparks Controversy
The criticism emerged during a special episode of The Martin Lewis Money Show on ITV, where the consumer champion sat down with Chancellor Rachel Reeves to discuss the Autumn Budget measures. The Chancellor confirmed that from April 1, 2027, the annual tax-free allowance for Cash ISAs will be reduced from £20,000 to £12,000.
The remaining £8,000 of the allowance must be placed into Stocks and Shares ISAs instead. This move forms part of the government's strategy to incentivise younger savers to invest rather than keeping all their savings in cash accounts.
Lewis Voices Strong Opposition
Speaking directly to the Chancellor during their televised discussion, the MoneySavingExpert.com founder expressed his disagreement with the policy. "I knew the writing was on the wall and this was happening - I think this is the wrong way to do it by the way," Lewis stated. "I think there are other ways to encourage people to invest instead."
When pressed on whether reducing the Cash ISA limit would significantly increase investment participation, Lewis questioned: "Do you really think cutting the Cash ISA limit will make a substantial difference to the amount of people who invest?"
Government Defends Investment Strategy
Chancellor Reeves defended the policy, emphasising that 90% of people with savings will still pay no tax on their savings under the new system. She clarified that the changes wouldn't work in isolation, pointing to parallel reforms in financial advice and guidance.
"We're at the same time changing the advice and guidance," Reeves explained. "I've worked with the Financial Conduct Authority to get these changes, and they'll start this coming ISA year."
The Chancellor revealed that over 50% of the ISA market, including major providers like Hargreaves Lansdown, HSBC, Lloyds, Vanguard and Barclays, have committed to launching new online investment hubs to support the initiative.
In a significant concession, state pensioners will be allowed to keep the full £20,000 cash ISA allowance, protecting older savers who may be less comfortable with investment risks. 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."
